THE COMMERCIAL property market will “stabilise” this year after the turmoil of 2009, according to annual projections from BNP Paribas Real Estate.
The giant company with 125 offices in 25 countries, including Ireland, briefed more than 2,000 property experts in Paris last Thursday on the prospects for the coming year.
Company executives explained that while the euro zone and the British economy were no longer in recession, GDP would remain at a low level in 2010. “The crisis has been deep and long and its effects on economies have been significant. Some difficult months are still ahead of us. The real estate markets that reached low levels of activity in 2009 are showing some promising signs,” according to the company.
BNP said its European investment market index confirms that the improved conditions began in Q3 of 2009 while overall returns increased by 7.2 per cent in Q4. The price correction that took place in all European markets was allowing investors to come back into the markets to avail of opportunities. Moreover, deals above €40 million were being closed again more frequently, showing that investors were able to access credit more easily.
The company said that while the European prime yield index dropped for a second quarter in a row, this trend was still not common in all European markets.
BNP said its European office take-up index rose by 7.4 per cent after falling for two years. In almost all European markets take-up activity regained momentum in the final quarter of 2009, reaching levels unseen since Q3 in 2008.
This trend could be explained by large deals that fuelled a market which had registered very low levels during the first three quarters of 2009. BNP’s prime index remained more or less stable, reaching what looked like the lowest point of the fall for the moment.
Patrick Curran, managing director of BNP’s Dublin real estate office, said that after a difficult property market in 2009 this year had started with more optimism with the general consensus being that Ireland plc has made the hard decisions and 2010 would be the year of implementation. “From an all-time low in investment transactions in 2009 we believe there will be some opportunities for the limited number of Irish investors with hard cash together with international investors who are yield-sensitive. In the circumstances, probably for the first time in the last 10 years, prime retail investment product at attractive yields in Grafton Street and Henry Street will be available, as will third generation offices in the docklands and in the vicinity of St Stephen’s Green.”
Curran said that while occupier demand for offices was likely to remain relatively weak in 2010 compared to peak levels in 2007, the market would continue to contract with occupiers keen to avail of flexible leases on lower rents and with more significant inducements. This would be particularly so in well located high quality buildings. Poor accommodation in secondary locations was likely to become obsolete. PNB believes that the office market is at the bottom of the cycle and take-up levels in 2010 would be over the 75,000sq m (807,293sq ft) in 2009.
Commenting on the retail market, Curran said that with the exception of the modern suburban shopping centres – such as Dundrum, Blanchardstown and The Pavilions – retail would continue to be a difficult area in 2010. Independent retailers are likely to find 2010 challenging given the high associated operating costs and the fact that consumer confidence remains low.
