Commercial property market still going strong

JLL reports that capital values up by 2.6% in last quarter and 7.6% in past 12 months

The commercial property market continues to prosper, with the latest JLL Irish Property Index reporting overall returns up by 3.8 per cent in the past three months and by 13.1 per cent in the past 12 months.

Capital values increased by 2.6 per cent in the last quarter and by 7.6 per cent over 12 months.

The strong performance stems from stable growth in both capital and rental values.

The last quarter saw growth in all three sectors, with offices recording the strongest increase of 4.6 per cent, followed by industrial (2 per cent) and no change in the retail returns.

Overall, capital values have increased by 87.4 per cent since the bottom of the market but still remain 38.5 per cent lower than the peak in Q3 of 2007.

As well, overall income increased marginally by 0.7 per cent in the past three months after a drop of 5.1 per cent in the previous quarter.

On a positive note, rental values across the entire portfolio increased by 1.6 per cent in the past three months and by 8.5 per cent over 12 months. Retail had the greatest increase (3.7 per cent), followed by industrial (3.1 percent) and offices with no change.

Overall rental values across the entire index increased by 1 per cent in the past three months and by 8.6 per cent in the past 12 months. Offices have the greatest increase in the quarter (1.6 per cent ), followed by industrial (0.7 per cent) and retail (0.1 per cent).

Hannah Dwyer, head of research, said the index continued to show stability and a steady income return up 3.8 per cent in Q3.

In the past 12 months investors have achieved strong overall returns of 13.1 per cent. Capital growth was the main driver of the performance of the index, with an uplift of 2.6 per cent in the quarter and, in particular, strong growth in values for the office sector of 4.6 per cent.

Ms Dwyer said it was important to note that the quarterly index for valuations up to the end of September did not include the revised stamp duty from 2 to 6 per cent announced in the budget.

This would lead to a reduction in the value of all commercial property, which at -3.7 per cent would be almost equal to the increase in stamp duty.