2013: Prospects for the year ahead
Mark FitzGerald Chairman, Sherry FitzGerald Group
What should Nama’s strategy be in 2013?
From the perspective of economic and social recovery we would see Nama beginning to fund residential and office development in some of our key cities. A more active role in Ireland comes after Nama being busy in the London market.
After four years of market contraction, the commercial and residential markets have both begun to stabilise, most notably through the uplift in market activity. The overall commercial and residential market in 2012 should exceed €6 billion for the year. Pure investment market activity is likely to reach €750 million in 2012 – a notable increase from less than €200 million in 2011.
Nama’s objective should be to marry the demand for product while generating liquidity for itself and its debtors. Nama’s staple finance should be maintained and expanded as appropriate in the year ahead.
Have commercial property values stopped falling?
The most straightforward answer to this is that commercial values have begun to stabilise nationally, especially in the key cities. This is notable for prime assets – Grade A1 offices in Dublin’s Central Business District.
The same could be said for Ireland’s prime hotels and shopping centres. But the gap between prime and secondary assets is widening.
Well-located and fit-for-purpose properties will stabilise and indeed increase long before the more challenged units in less popular locations.
What part of the commercial market would you recommend to investors?
The two markets that stand out to me at the moment are the Central Business District office market in Dublin and the Galway city office market.
The Galway market has the lowest vacancy in the country and Galway benefits from BMW categorisation for foreign direct investment.
In Dublin occupier demand has improved steadily over the past two years, generating a shortage of sizeable Grade A space. Unless development soon begins there will be upward pressure on rental levels over the next 12-18 months with a knock-on impact on returns and values.
Indeed, for investors looking for capital appreciation in the medium term, but without requirement for immediate liquidity, investment in well located residential and commercial development land in key cities is worth considering.
How long will it take for the market to recover?
When Europe recovers, Ireland is likely to recover quickly. Ireland led Europe into the crash and looks like leading it out of it. Ireland is seen as a European recovery play. Moreover, if Ireland continues to remain on course, as I anticipate that it will, then I think when the history books are written, they will say that the recovery began in 2012 in our cities and key regional centres, and spread to most other locations over the next three to five years.
James Nugent MD, Lisney
What should Nama’s strategy be in 2013?
They should concentrate on disposing of properties where they believe there is limited growth potential; as time goes on, these assets will prove more difficult to shift and there is no real return to the taxpayer by tying up resources with their ongoing management. In addition, they do need to sell some (but a limited amount of) prime assets perhaps with staple finance.
More importantly, I’d really like to see strong evidence of Nama rolling out the €2 billion of investment which was announced earlier during the year and there is a case to be made for supporting office refurbishments, limited office development and residential (housing, not apartment) schemes.
Have commercial property values stopped falling?
IPD (Investment Property Database) is showing a fall of 5 per cent over the past 12 months but I think these values have stopped falling. Some sectors may still be at risk to further falls. I’d have a concern about some out-of-town retail properties in certain provincial towns.
