Saturday 16 December 2017

Returns remain positive for investors despite value falls

Donal Buckley

CapitaL values and income for commercial property continued to fall during the third quarter of the year. Nevertheless overall returns for investors remain positive according to the Jones Lang LaSalle Irish Property Index.

Both capital values and income fell 2.4pc, according to the index while rental values fell 0.5pc. However decreases were slightly lower than the second quarter when they fell by 2.3pc, 2.5pc and 1.4pc respectively.

Hannah Dwyer, research analyst at JLL, said that despite the falls in capital values and income, the overall income yield of 9.6pc for the whole index portfolio means that investors still get positive returns.

"The high yield is therefore sustaining any falls in values and is contributing to a positive overall index increase of 0.1pc in the quarter and an increase of 4.5pc in the year," she added.

On the other hand, she points out that rental values are still drifting down, and as properties in the portfolio move towards the end of leases on much higher rents, they will continue to feel this impact.

Capital values for each of the three commercial property sectors, offices, retail and industrial, continued to decline in Q3 2012. The greatest fall in capital values continues to be for retail, down 4pc, followed by offices down 1.2pc and industrial down 1pc.

Decreases in retail and industrial capital values are greater than last quarter when they decreased by 2.9pc and 0.5pc respectively.

Rental values for offices fell 1pc, and retail rents dipped 0.1pc but at a much slower pace than the previous quarter when they fell by 1.4pc and 1.6pc respectively.

Industrial remained consistent, with no change in the last two quarters.

Ms Dwyer also added that "although there are still decreases across most indicators, the pace of decline does appear to be slowing with all of this quarter's year-on-year changes significantly lower than the results a year ago".

She instanced how the pace of decline in the capital value and income aspects of the index slowed from 13.7pc and 7.9pc in the 12 months to Q3 2011 compared to declines of 5.2pc and 4.3pc in the 12 months to September 2012.

Indo Property

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