Green shoots as returns increase in first quarter
Overall returns for Irish commercial property increased by 0.9pc in the first three months of this year, according to Jones Lang LaSalle's latest investment index.
this helped to reduce the negative performance over the 12 months. The performance in Q1 2011 is an improvement on the 1.6pc fall in overall returns in 2010 and the --19.2pc overall return recorded in 2009.
Margaret Fleming, JJLS director of investment, says the performance was achieved despite continuing declines in capital values and rents for all three commercial property sectors in Q1 2011.
However, "the pace of decline is slower than previous quarters, which may indicate market stabilisation, a positive sign for commercial property in Ireland," she adds.
The capital value of commercial property in Ireland fell by 1.5pc in Q1 2011 and by 10.0pc in the year to March 2011. Overall capital values in Ireland have now fallen by 61pc since the market peak in Q3 2007.
The industrial sector continued to experience the sharpest decline in values -- down 1.7pc in Q1 2011 and 16.5pc year on year.
Office values fell 1.6pc in Q1 2011 and 9pc year on year. Retail capital values dropped 1.3pc in Q1 2011 and by 9.3pc year on year. The rate of decline in values continued to slow in Q1 2011.
Rents fell by 3.1pc in Q1 2011 reflecting the pressure on occupiers and attractive inducements. Office rents fell 4.3pc in the quarter and by 21.3pc in the year to March. Industrial rents were unchanged during the quarter bringing the 12 month fall to 34pc.
Retail rents fell 2.4pc in Q1 2011 and 22.8pc in the 12 months.
As a result, income levels fell 4.8pc and 10.2pc respectively.
Ms Fleming said the reduction in the pace of decline coupled with attractive income yields were positive signs.
However, the index does not allow for the proposed legislation on the abolition of upwards only rent reviews in existing leases. "Should a downward rent review be introduced into existing leases, a fall in capital values of an estimated 20pc to 30pc may occur," she adds.