A notably strong performance by the commercial property sector in the second quarter of the year has boosted the annual return to 32 per cent for the year to the end of June, according to the Irish Property Index compiled by the Society of Chartered Surveyors and the London-based Investment Property Databank (IPD). The growth is a shade lower than the returns achieved in 1989 - the peak of the last boom. The latest overall return of 32 per cent is marginally ahead of the 31.8 per cent reported a week ago by agents Jones Lang Wootton in its quarterly index. The IPD study shows the market finished the first half of 1998 with a flurry, delivering a return of 8.9 per cent for the second quarter. The portfolio benchmark, which reflects the overall return to institutional property investors, was higher at 9 per cent, largely as a result of development profits. The underlying components to property performance remained strong. In the space of three months, yields fell by almost a quarter of a point, while rental values rose by a further 4 per cent. Capital values, in response, increased by 7.2 per cent. Offices continued to lead the market, recording an exceptional return 10.1 per cent. A significant 0.28 per cent drop in yields, coupled with a 4.6 per cent rise in rental values, gave rise to an 8.4 per cent uplift in office values during the second quarter of 1998. On an annual basis, offices forged well ahead of the rest of the market.

The return of 35.5 per cent achieved for the year to June is the highest recorded by this sector since 1984, according to the index's records. Retails improved on the previous quarter's performance, delivering a return of 7.8 per cent. Capital values rose by 6.2 per cent, representing a two percentage point improvement over the first quarter of the year. Rental values regained their momentum, rising by 3.7 per cent. Yields showed little sign of bottoming out, falling by 0.19 per cent. IPD also reports that the industrial market picked up in the second quarter of the year, yielding a return of 6.4 per cent. Capital growth of 4.4 per cent was primarily the result of a 3 per cent rise in rental values. Yields continued their downward trend, shortening by 0.13 per cent, to finish the quarter at 8.04 per cent.

The impressive performance of the property industry is a spin off of the thriving economy. With many foreign companies setting up operations in Ireland, inward investment is running strongly and the demand in all sectors has never been stronger.