Stamp duty cuts may help prime property values
Values for prime Dublin offices and shops could be in line for increases of between 3pc and 4pc over the next few months following the cut in stamp duty rates from 6pc to 2pc in last December's Budget.
That is one possible interpretation of a review of Dublin commercial property yields by consultants CB Richard Ellis. The review sees prime yields trending stronger for prime offices and their possible contraction from 7.5pc to 7.25pc. At the same time yields for prime high street shops could contract from 6.5pc to 6.25pc.
"Now that we have some clarity on the upward only rent reviews issue and that we can see investors beginning to engage and some transactions close to signing, we are expecting prime yields to trend stronger over the coming months," CBRE director Marie Hunt adds.
Other areas to trend strong include prime shopping centre and retail warehousing units as well as good secondary high street shops where yields may range between 8pc and 8.75pc. Prime Dublin industrial yields may also trend stronger.
On the other hand she points out that yields on secondary and some provincial properties are likely to trend weaker on the basis that there are limited buyers for this product and yields for secondary retail warehouses may reach 11pc.
The small yield changes will not significantly impact on the competitiveness of prime Dublin property compared with their international counterparts which continued to improve last year.
According to CB Richard Ellis, Dublin's prime office rents were unchanged during the fourth quarter of 2011, at €323 per sqm, and consequently they have slipped down the European rankings from 23 to 25.
On the other hand, rival agency Jones Lang LaSalle estimates Dublin's prime office rents at an average of €344 per sqm. Consequently, the JLLS league ranks Dublin office rents higher at 17 out of 34 European cities and puts them ahead of Amsterdam, whereas CBRE ranks Dublin rents below it and other cities.
JLLS estimates Dublin office capital values at €4,593 per sqm and again ranks them at 17 out of 24 cities but behind Amsterdam, where values average as much as €6,036 per sqm.
At year end CBRE estimated Dublin office yields at 7.5pc -- which ranked them as low as 40, down from 33 in Q3 2011 -- in a survey which is wider than that of JLLS as CBRE also includes the Middle East and Africa.
On the basis of CBRE's latest view of Dublin yields contacting to 7.25pc, this would move Dublin office values up by only two places to 38.
In 2010, CBRE ranked Dublin office rents as high as 13th in the league. During the fourth quarter of last year, the EMEA index showed office yields across all 53 cities rose by two basis points to 5.43pc while office rents stabilised.
At the year end Dublin's retail rents, at €2,350 per sqm, were ranked 15 and were still ahead of Birmingham and Man-chester, where rents are less than €2,000 per sqm.
Then Dublin prime retail yields were ranked at 33, but as yields contract they are likely to improve their ranking by only two places. Dublin industrials were ranked 25 on the rental league and 34 in the yields league out of 44 markets surveyed.