Local property firm sees more liquidity in Irish commercial market in 2011

It seems almost inappropriate on a morning when bond markets are effectively signalling that Ireland must seek EU/IMF intervention for the stated cost of the financial crisis and the spiralling budget deficit, to be reporting on one small aspect of part of the solution to the crisis. But life goes on. It seems that 2011 will have a huge burden of expectations to satisfy – not only are we to see GDP which will have fallen by an expected 11% between 2008-2010 turn positive to a modest degree, not only is it the year when Ireland takes action (or will have action taken for her) to tackle the budget deficit in a serious way but it is also now the year when it is expected that some liquidity will return to the commercial property sector.

John Moran, managing director of  property giant and NAMA valuation-panel member Jones Lang Lasalle (JLL) pens a piece today for the Irish Times in which he reflects on the state of the commercial property market. He laments the paralysis in banks and NAMA (not too much it has to be said but then again JLL will depend on good relations with banks and NAMA to survive and prosper in the years to come). He takes a couple of pot shots at rivals presumably who are hawking property that cannot be sold. He seems comforted by what he sees as an abundance of US, UK and other cash waiting for a home in Irish commercial property and he is confident that in 2011 banks and NAMA will open the sluices to deliver quality and quantity onto the Irish market.

The commercial market in Ireland is in a precarious position. Though transactions are substantially up on 2009 (51% for the first nine months, according to John) and the most recent indices from JLL and rival index SCS/IPD both point to the pace of falls softening, it should be said that both indices point to rent dropping at 20% per annum annualised – this in a country where the vast majority of commercial rent agreements provide for upward only rent reviews (it was only from 1^st March 2010 that such terms were banned by the government for new agreements entered into after that date). Any economic recovery which would underpin commercial property rents and capital values is also uncertain though there appears to be a consensus at present that there will be positive GDP growth in 2011 despite the scale (€6bn according to reporting today) of the adjustment in the forthcoming Budget on 7^th December, 2010.

So perhaps time to hibernate for a couple of months by which time the current horrors and paralysis may have passed.