Returns of 32.4% highest since '98

MarketReport: Overall returns from commercial property in Ireland grew by 32.4 per cent in the year to the end of September, the highest growth rate since 1998 when the country was experiencing exceptional economic growth, according to the latest Jones Lang LaSalle Irish Property Index.

Commercial property returns grew by 22.6 per cent in the first nine months of this year and by 4.7 per cent in the third quarter alone, the quarterly index found. "The main factor in the year-on-year growth rates was the rise in capital values across all three sectors of the market," says Dr Clare Eriksson, head of research at Jones Lang LaSalle. "There was a surge in the value of industrial properties while the retail sector lead the way in rental increases."

The index found that overall capital values were up by 3.6 per cent during the third quarter and by 26.7 per cent in the year to the end of September. Industrial property showed growth of 8.8 per cent in capital value during the quarter and a year-on-year rise of 24.1 per cent. Retail property returned a capital increase of 4.4 per cent in the quarter and 18.8 per cent in the three quarters to September 2006, outperforming offices which rose 2.1 per cent and 18.5 per cent in the same time periods. "The capital growth of offices and retail property has been assisted by the continuing downward shift of prime yields for both of these sectors," Dr Eriksson says.

Rental values across the entire portfolio rose by 1.3 per cent in the quarter and by 3.4 per cent for the three quarters to September 2006. The industrial sector was the strongest rental performer in the quarter with an ERV increase of 2.6 per cent compared to rises of 2 per cent and 0.6 per cent for retail and offices respectively. However, in the 12 months to September, retail property outperformed the other two sectors with rental growth of 8.6 per cent; in the same period rental values for offices increased by 2.9 per cent and by 2.6 per cent for industrial.

Income values in the overall portfolio rose by 2.5 per cent in the quarter and by 4.9 per cent in the year to September 2006 as a result of some strong rent review settlements.