Pace of decline in property values eases
The value of Irish commercial property has fallen 55.6pc from its September 2007 peak but the pace of decline has slowed.
According to the most authoritative indicator, the Society of Chartered Surveyors/ Investment Property Databank Index, property values fell 4.9pc in the last quarter of 2009 -- the lowest quarterly decline in almost two years. For the whole of 2009, the SCS/IPD index shows capital values fell 28.9pc which was shallower than 2008's record fall of 37.5pc.
The value of retail property suffered the sharpest fall in 2009 -- down 30.3pc driven by sharp declines in Henry St and Mary St -- down 31.6pc and Grafton St -- down by 31.3pc. Initial yields for the two prime shopping precincts have risen to 6.1pc and 6.8pc respectively up from 3.6pc and 3.5pc at the end of 2008.
Across all three sectors, offices, retail and industrial, income returns for 2009 were 7.7pc, contributing to an annual total return of 23.3pc -- again shallower than 2008's 34.5pc.
Overall rents for the year fell 22.4pc but the pace of rental decline also appears to have eased from its most severe rate of 8.2pc in the third quarter of 2009 to 6.7pc in the fourth quarter.
IPD's Ireland country manager Sofia Underabi says that the slower pace of rental decline "further softens the pressure on capital growth."
The rate of decline differed very little between the three sectors varying by only three percentage points from the annual average rate of decline. Office values fell 4.8pc in Q4, retail 4.9pc and industrial values fell 5.5pc.
An interesting aspect of the survey is that, although property underperformed equities over the full 12 months, it outperformed equities in the last quarter and also over the medium term.
As measured by the ISEQ, equities returned 29.9pc for 2009 and but recorded a minus 10.9pc return for Q4. In contrast, property suffered a return of only minus 2.9pc in Q4.