Returns grow despite falls in rent and values
Commercial property returns recorded a 1.2pc growth in the third quarter of this year despite capital values and rents for all commercial property sectors continuing to fall.
These are among the findings in the latest Jones Lang LaSalle (JLLS) Overall Returns Index.
Capital values fell by 1.1pc during Q3 and Dr Clare Eriksson, JLLS head of research, says this is the lowest fall in values since the market peaked in 2007 and over that time values have fallen 59pc.
Retail values performed best in Q3 -- down only 0.6pc and by 5pc in the nine months to September. Capital values for offices dropped by 1.2pc in the quarter and 9.2pc over nine months. Industrial values fell by 3.1pc in Q3 and by 10.4pc in the year to date.
However, these declines contrast with estimates from rivals CB Richard Ellis which show capital values rose by 3.3pc in Q3 for offices and 3.8pc for retail in Q2.
CBRE's calculations are based on offers from prospective buyers for prime Dublin properties whereas JLLS' index is based on the value of a portfolio across a range of property.
Dr Eriksson also takes some comfort from rental trends which dropped 5pc in Q3 and by 19.8pc in the nine months. Industrials recorded the weakest rental value performance in Q3 as it dropped 5.8pc, compared to a 5.4pc drop for offices and a 4.3pc fall for retail. Over the nine months rents dropped by 29.8pc for industrial, 20.7pc for offices and 15.7pc for retail properties.
She adds that the slowdown in the rate of capital value declines "may indicate that we might be reaching the bottom of the market for prime commercial property in Ireland during the next three to six months".
JLLS managing director John Moran, also adds that current income yields in excess of 8.5pc "provide a cushion against further value declines."