Improving office values to benefit taxpayers
Values for offices in Dublin's north docklands and part of Dublin South docklands have begun to improve -- a trend which could help the banks in their negotiation of loan valuations with the National Assets Management Agency.
Consequently, it could also mean that taxpayers will need to provide less support to the banks.
According to Investment Property Databank, the authoritative UK analyst of commercial property trends, Dublin 1 office yields showed an effective 2.7pc improvement in the last three months of 2009. At the same time, Dublin 2 office yields improved 0.5pc.
In contrast, Dublin 4 offices saw their valuations fall a further 2.4pc on top of the sharp falls seen over the previous 21 months. Dublin 4 includes some areas close to south Docklands such as Barrow St, where Liam Carroll developed the Gasworks offices currently occupied by Google and others.
IPD executive Phil Tilly says that the improved yields in Dublin 1 and 2 reflect rental trends and positive sentiment for offices in those areas. He was speaking at the Society of Chartered Surveyors seminar on the performance of the 2009 IPD index.
It shows that while most Dublin office rents fell sharply in the first nine months of the year, in the fourth quarter, the fall in rents outside Dublin had been pared back to less than 2pc while those in central Dublin had been pared back to a fall of 8pc for the year.
Other sectors to show substantial slowdowns in the rate of decline included rents for shopping centres and retail warehouses.
Meanwhile, Irish yields are now making investment more attractive as the yield gap has improved to 320 basis points above the risk free rate offered by the 10 year Government bonds. .
Eoin McDermott of the SCS said that yields for prime and good secondary properties are unlikely to rise much further and may even show signs of strengthening in some cases. "Yields for poorer located properties could see some further softening," he added.
"Security of income will be paramount in 2010 and while I expect a positive total return for the year, I do not think that will exceed the income return," he concluded.
The IPD index shows Irish commercial values fell 55.6pc in the 27 months since its September 2007 peak but, encouragingly, the pace of decline slowed in Q4 2009 when property values fell 4.9pc -- the lowest quarterly decline in almost two years.
Meanwhile a DTZ Sherry FitzGerald report shows that Dublin offices became more competitive last year as they fell from 20th in 2008 to 33rd in 2009 in the global rankings of occupancy cost per workstation. They are now less expensive than Amsterdam, Rome and Stockholm.
DTZ director Peter Waller said the cost of occupying offices in Dublin fell by 29pc to €6,590 in 2009. However he warned that despite local authority rates being left unchanged they were still at unsustainale levels.