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Archive for January 10th, 2013

[30 second version – CBRE has this morning issued its predictions for the Irish commercial property market in 2013, it forecasts a firming up of rents, yields and prices for prime property but continued drift for secondary property. There is also a review of 2012 which shows evidence of transaction growth compared with 2011. The press release is here and the report is here]

Property services powerhouse and NAMA valuer, CB Richard Ellis has this morning issued its annual outlook for Irish commercial property. I normally start these blogposts with a dose of mickey-taking about how property folks have in the past gotten their forecasts wrong and that they have, what Dr Stephen Kinsella would call a “doxastic commitment” – others might just say they have “skin in the game” – towards the promotion of market conditions which encourage transactions which generate fees, but that would be to ignore the amount of work and analysis that goes into these reports which sometimes reveal new transactions, and which tend to give a decent overview of the recent past. So no such criticism here today – however, they might want to learn what “sanguine” means before using it in a sentence! When they say they are “more sanguine about prospects for secondary and provincial properties which they say will take longer to unwind”, I don’t think they mean prospects for secondary markets are better than in prime markets.

2012 was, by all accounts a decent year for the property industry compared with 2011. There were more transactions, even if prices overall fell by over 5% with rents also declining modestly. 24 hotels were sold in 2012, twice the total sold in the previous three years combined. There were €600m of so-called investment sales, compared with about €200m in 2011 but a considerable way off the €3bn in 2006. There has been a lot of non-Irish money chasing property but it’s mostly interested in prime. There were 46 development land sales in 2012 more than the three previous years combined, and CBRE says there is demand in Dublin for sites with 50-plus house potential. Vacancy remains elevated but there are looming shortages with central Dublin office space cited as a potential bottleneck – CBRE says that no new speculative development can take place at present with current building costs and rents.

The outlook for 2013 is “bullish” for prime property, “sanguine” for secondary and provincial property and notably predicts loan sales to feature in 2013. Prime rents might even rise modestly but the prospects for secondary don’t look great. They see the supply of property to the market from banks and the like, to be “regulated” – NAMA banks, as opposed to NAMA itself, may bring more hotels to the market.

So, no wild predictions of a boom, more a gentle recovery at the prime end of the market and further drift in secondary and provincial areas, or “polarization” as CBRE say.

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A formerly-prolific commenter on here, John Corcoran has announced that Korky’s shoe shop on Dublin’s Grafton Street has closed after what appears to be a settlement of a long-running fight with his landlord, Canada Life. The epic battle was over the rent on the 900 sq ft shop at 47, Grafton Street, which has, in recent times, doubled as a giant billboard with the tireless John erecting a series of building-height posters championing the cause for reform to Ireland’s notorious Upward Only Rent Review (UORR) clauses in commercial leases. The clauses in leases created before March 2010, have left many commercial tenants today, paying rents at levels appropriate to the peak of the Irish property boom. Commercial market rents have declined by just over 50% from the peak, the economy has taken a hammering and retail sales have been badly hit and new tenants today enjoy a commercial advantage over tenants handcuffed in pre-March 2010 UORR leases.

John has been locked in a legal fight with Canada Life for a number of years –eight according to the Independent yesterday, but the High Court case is more recent – and although the terms of the settlement haven’t been released, it is understood that Canada Life has agreed to release John from his lease early, though with a payment of compensation.

This evening, the small shop on Grafton Street has metal shutters on the entrance and the windows are plastered with remains of the signs – “20% off all marked prices” and “closing down 8th January” and there are smaller posters saying business continues as normal at the three other Korky’s branches at Dundrum Town Centre, the Ilac Centre and “GPO” which probably refers to the branch on Henry Street.

So what does this mean for the campaign for reform of UORR lease terms, reform which was ditched in December 2011 when justice minister Alan Shatter hid behind finance minister Michael Noonan’s skirts in the Dail, and made what was a shock announcement then of the abandonment of a commitment made by both Coalition parties in the run up to the 2011 General Election.

Of late, John Corcoran’s Irish Commercial Tenants Association has taken to advertising in the centre-fold of the Phoenix magazine and the IrishEconomy.ie website seems to get a regular stream of stock comments lamenting the ballooning of property prices and rents in the 2000s, but with the settlement of the case on Grafton Street, it remains to be seen if the energy for the campaign for UORR reform will be dissipated.

And as it’s the end of an era, I’ll leave you with a record of the posters erected by John over Korky’s in the past three years.

Jobs

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