Investment on Dawson Street sets record price

OfficeMarket: A retail/office building in D2 sold for €1m over its €3.5m guide, and attracted more than 20 tenders. Jack Fagan reports

With the Bank of Ireland forecasting that commercial property returns could reach 15 per cent this year, it is hardly surprising that investment properties have never been as scarce in Dublin and those reaching the market are selling for record prices.

The latest commercial sale to underline the strength of the market was at 54 Dawson Street where a mixed retail and office building was sold for just over €4.5 million - a long way ahead of Lisney's initial guide price of over €3.25 million which was later revised up to more than €3.5 million.

The four-storey building is currently producing €124,000 per annum. At this selling price, the initial yield works out at 2.5 per cent - by far the lowest on Dawson Street.

However, the agency puts the equivalent yield at 3.6 per cent in the expectation that after a rent review this month, the ground floor rent of €60,947 will rise by about €25,000 and a tenant will be found for the second floor office suite at €30,000 per annum.

The ground floor extends to 135.26 sq m (1,455 sq ft), the Portuguese Tourism Board pays a rent of €33,013 for the first floor offices while the third floor is rented by Malaysian Airlines at €30,000 per annum.

Small investments like this generally attract up to half a dozen tenders but this time Lisney set a record for the agency by attracting more than 20 tenders.

Lena Clarke of the agency said the building was seen as a "clean investment" with good growth potential because of its prime location.

Though a small number of similarly sized investments are due to go for sale in the city centre before the summer, the expectation is that investments will continue to be in short supply and therefore overvalued because of the huge weight of money chasing property.

Though there is no shortage of apartments available for sale in the city, investors have been reluctant to increase their exposure in the buy-to-let market because of the marked slippage in rents and the general perception that the rental market is already oversupplied.

For many investors with cash readily available, they have no option but to either join syndicates or entrust their savings to managed funds concentrating on UK commercial property.

Here again, experts are complaining that many of the available UK investments are either over-rented or over-priced.

Ever fewer properties can be bought off-market and these generally go to high profile estate agents with a track record in the UK market.

The Bank of Ireland forecast that commercial returns could rise from 11.5 per cent in 2004 to 15 per cent this year is based primarily on the expectation that the office market is bouncing back.