CBRE says commercial property should pick up in second half of year

Ireland's commercial property sector should pick up in the second half of 2008 after a slow start to the year, according to a report by real estate firm CB Richard Ellis (CBRE).

However, the firm says rents and land prices may remain static and commercial tenants are in a strong position to negotiate better rental deals from landlords.

Developers looking for increased returns will need to look a little harder for investments with potential and, in Dublin, that includes sites close to public transport.

The report says the value of some suburban sites will be enhanced by the M50 upgrade, due to finish this year, and the Luas expansion, due to open in 2009.

Dublin office lettings will drop by as much as 20 per cent, from a record 250,000sq m (2,690,978sq ft) in 2007.

"Take-up of as much as 200,000sq m is achievable," the report says.

"We do not anticipate any significant appreciation in Dublin office rents this year."

The retail sector will also be slow, as there are very few new shopping centres due for completion this year.

Landlords "will be more inclined to give generous inducements to key tenants to secure lettings", according to the outlook.

The CBRE report identifies one positive trend in the retail sector - "the increasing appetite of US and European retailers" for Irish sites.

US retailers Gap, Tiffany's, the Disney Store and Abercrombie & Fitch are all seeking to begin trading here this year, the report says.

Purchasers of development land should be wary of development and vendors should be able to sell so long as they "accept that land values are down on the levels achieved at the height of the development boom".

The hotel and pub market will be stagnant, says the report, noting that the number of pubs sold in Dublin last year was down 50 per cent year on year.

The CBRE outlook comes as an AIB bulletin says the housing slump may continue despite changes to stamp duty and falling prices, in part because of gloomy market predictions that become self-fulfilling.

"If this scenario proves to be the case, then developers can be expected to slow the rate of house completions even further," the AIB report says.

The report says commencement notices fell by 51 per cent year on year in the three months to October.

Total completions look set to reach 78,000, according to the bulletin from AIB Global Treasury Economic Research. This compares with 88,400 housing completions in 2006.