While we’re still waiting for a commercial property sale price database, we can always rely on Jack Fagan in the Irish Times who reports today on the recently completed investment commercial property sale of the 40,000-sq ft HSE headquarters in the Millennium Park, Kildare for €8.99m and which generates €880,000 in rent annually giving a 9.8% gross return.
Jack also reports that Savills will later today (not available on its website at time of writing but should be available here) put on the market a 20,000-sq ft office block, Block D of the Parkgate Business Centre just across the road from Heuston Rail Station on the north side of the Liffey on the edge of Phoenix Park in Dublin (view on map here). Currently rented to gilt-edged public sector tenant, the Health Service Executive (HSE, coincidentally was also the tenant in the Millennium Park transaction referred to above) for €715,000 per annum, the property is expected to be offered at €7.05m. This is what the investment might look like using sq ft.
According to the macroeconomic assumptions in the recent Central Bank of Ireland supervised stress tests, the baseline scenario for commercial property prices is for a fall of 2.5% in 2011 and an increase of 1.5% in each of the years 2012 and 2013. The CBI says the baseline is not a forecast but the denial has not been convincing.
(Click to enlarge)
So if you believe that commercial property in Ireland is at the bottom why wouldn’t you jump at this investment, which incidentally is also across the road from the recently completed Criminal Court complex which might give rise to office demand from the legal and associated professions? It’s not clear from the reporting if the lease is an Upward Only Rent Review lease but regardless, the €36 psf looks high for Dublin 8 rents and a concern might be that this will come down. The building is said to be subject to a 25 year lease to the HSE commencing in 2001 with a break option in 2016 and a rent review is due in 2011.
The building is reported to have been developed by South Dublin Construction, the company associated with Michael Murphy of Astondale and Chartbusters fame. The sale is a receiver sale by Kieran Wallace on behalf of ACC Bank.
NAMA Wine Lake 
It is over-rented. Market rent should be circa €22 per sq. ft.
Shouldn’t investment grade real estate offer a risk premium over government bonds? There won’t be substantial outside investment in Ireland until the uncertainty relating to its future is resolved.