Credit constraints restrict property deals

A lack of funding has led to a “very significant decline in transactional activity” in the Irish commercial property market, according to the latest bi-monthly report from CB Richard Ellis.

The assessment of the market during March and April is far more downbeat than the previous survey which suggested the commercial property market was "weathering the storm well".

The report found that there are virtually no freehold sales taking place due to restrictions accessing credit and noted that lease negotiations have become increasingly protracted as occupiers seek more flexible terms.

Despite ongoing strong demand in the office sector the report notes that it is "certain that some occupiers will put their expansion and re-location decisions on hold".

In the retail sector the plan for the "Dublin Central" redevelopment off O'Connell St and Arnotts "Northern Quarter" were broadly welcomed. It also notes that a number of retailers including Tesco, Dunnes, Super Value and Centra have announced expansions.

The report found that Grafton St continues to command the highest retail rents of €10,000 per square metre, followed by Henry St on €7,500 per square metre and Liffey Valley on €3,900.

According to CB Richard Ellis land values have declined by as much as 20 per cent and sales of pubs and hotels have been subdued.

Despite issues with access to funding a number of high profile sales did go through, including the Bachelor Inn on O'Connell St for a reported price of €7 million.

While CB Richard Ellis remains confident that any cyclical slowdown in commercial will correct itself they view tax harmonisation as the most significant long term threat to the sustainability of the office sector.