Tuesday 26 September 2017

Dublin offices among best value in Europe

Donal Buckley

Dublin offices are ranked among the better investment prospects in Europe in a new analysis of prime office investments. Standard Life, the life assurer, points out that when comparing Dublin office prices against historic average yields, Dublin office yields at 7.5pc are the second highest after Lisbon and are good value. On a historic yields basis Dublin and Madrid are the only two capitals in Europe which are offering good value.

However, when comparing European yields to government bonds and adjusting for risk, Dublin offices are considered expensive. Some cities with lower yields are considered good value, including Prague with a yield of 6.5pc and Munich with a yield of 4.75pc.

The survey goes on to point out that it may be more appropriate in the current risk conscious market to compare office yields to corporate bonds rather than government bonds. By comparing Dublin yields with AAA benchmark corporate bond yields, the attractiveness of Dublin offices improves and they now offer fair value, but still not the good value offered by Madrid offices.

Meanwhile CB Richard Ellis estimates prime Dublin office yields at 7.25pc, which is lower than Standard's figure and CBRE says they are stable at this level as are prime yields across all sectors. CBRE says prime yields range from 6.25pc for retail high street to 9.5pc for industrial yields with retail shopping centre yields at 8.5pc and retail warehouse yields at 8.75pc.

Sean O'Brien, investment director at CBRE, also says that the recent IPD figures, which showed a 0.6pc increase in returns in the first quarter of 2012, will help to reinforce the interest of overseas investors in the Irish market.

Savills Ireland has also forecast that investment market turnover should reach €500m in 2012 as a result of concessions announced in the December budget, an increased volume of stock going for sale in Q1. It is also helped by how Dublin's office occupier market is performing well as well as a bottoming out of prime office rents in a range of €290-310 per sqm/year.

The agent is also encouraged by the minimal vacancy levels on prime high streets but says shopping centres rents have adjusted by 50-60pc.

The industrial market is burdened with a large amount of vacant space and as a result the gap between prime and secondary rents has narrowed considerably.

On a more positive note, Savills point out that the absence of any new completions of commercial accommodation in 2012, and the fact that there's none in the pipeline, is positive and will erode supply in the short to medium term.

Indo Property

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