Market up 3.5% at end of third quarter

Overall returns in the Irish commercial property market rose by 3.5 per cent in the three months up to the end of September, bringing the results for the past year up to + 9.3 per cent.

This was the eighth consecutive quarter that the Irish Index produced by Jones Lang La Salle showed positive results.

The findings will come as no surprise to the wide range of Irish and overseas investment funds and private individuals who are chasing distressed property assets being offered for sale on an almost weekly basis on behalf of the banks and Nama.

Investment sales have already exceeded €1 billion and could well reach at €1.25 billion by year end despite a strengthening in values across the board.

The JLL study shows that overall capital values increased for the second consecutive quarter by 1.1 per cent.

Not surprisingly, offices did best with a rise of 1.7 per cent followed by retail (+0.6 per cent) and industrial (+0.5 per cent).

Year-on-year values have continued to fall, although only marginally, with an 0.9 per cent slippage in the last 12 months.

Overall income rose by 1.3 per cent in the quarter compared to a slippage of 1.9 per cent in the previous three months.

In spite of an income fall of 3.8 per cent in the Jones Lang portfolio over the past 12 months, the properties still managed to produce overall returns of 9.1 per cent.

With increasing signs of more stability in the occupier market, JLL rental values rose by 3.3 per cent in the office sector and by 1.2 per cent in industrials.

Retail sector
However, the retail properties did not fare so well, falling 2.2 per cent in the third quarter.

Hannah Dwyer, head of research at JLL, said the continued fall in retail rental values – down 10.4 per cent in the last 12 months – highlighted one of the challenges facing the sector.

“This is a reality for many landlords and investors who have faced significant falls in values over the last few years. Although rents now appear stable for prime product, further rental pressure for non-prime units is still expected.”