It will be 3pm on 28th April, 2011 when SCSI/IPD release their commercial property series forIrelandfor quarter one, 2011. The competing commercial property index from Jones Lang LaSalle (JLL) is due any day now, it was released on 11th January, 2011 in respect of quarter four, 2010. The betting on here is that there will be continuing capital falls though rent decline might moderate.
In advance of the above two releases, we have a report from JLL on the Dublin Office (rental) market for Q1, 2011 which concludes that activity increased though the five deals below accounted for exactly 80% of the space rented in Q1. The report also claims that rents are stabilising with actual rents of just over €27/psf in the centre and €15/psf elsewhere. Headline rents are still in the €30-35 psf range for the centre but with rent-free periods and other temptations, the actual figure is considerably south of that.
The report also points to the tightening of supply with the overall vacancy rate dropping to 21% and there only being a handful of new 100,000 sq ft offices available acrossDublin. It is not clear how hard NAMA is pushing for development of its office development assets, for example, the Liam Carroll partly-constructed Anglo HQ, but the tenor of the JLL report is that, despite the overhang, there might be a demand for new large-sized, third generation, well-located accommodation.
NAMA Wine Lake 
@NWL, There’s are ingredients missing in the analysis above that makes any conclusion on the state of the rental market and particularly rental levels, meaningless.
Any real analysis of the market needs to include the length of the leases, the timing of break clauses, the length of the rent free periods and other tenant incentives (for example: contribution to fit out).
Then we will know. Without those ingredients it is just so much Agents’ spin.
@WSTT, I hoped the sense of resigned disappointment would have come across from the post title!You are absolutely right and I tried to supplement the table included in the JLL report with more contextual information which is available for the HMH transactions but not the other three (the fourth Google is a purchase transaction). The HMH transaction would indicate the actual rent was south of €27 psf once you take the 18-month rent free period on a 7-year min lease into account.
@NWL, Since the death of upward only rent reviews in new leases, the “Headline Rents” oft quoted by estate agents and picked up by the media and others to fudge real rental levels has no justification at all any longer.
It merely shows the lack of transparency in the Irish real estate market (or rather in what WAS the Irish real estate market – no such market exists in any significant way at present).
As an aside, it should be said that Twitter is no longer coming to Dublin it seems. A number of job advertisements appeared on Twitter in the last few days seeking applicants for roles “in our new office in London, England” See here for all Twitter jobs which include at least five in the UK
http://twitter.com/positions.html
and here for an example
https://twitter.com/job.html?jvi=obWDVfwp,Job
That’s a real shame. Although Twitter’s aim was to create “an initial and small presence in [Europe in] 2011” as reported in the Telegraph, it would have encouraged the further coalescence of a technological hub in Dublin and might have required a 20,000 sq ft facility. Sadly it seems it has gone to London.
@NWL, I posted it here 6 months ago that Twitter had decided to go to London rather than Dublin.
BTW, my mole in NAMA tells me that Noonan has directed NAMA to arrange to sell all its Irish held assets in London within the next 3 months. The vulture funds are going to love it when they hear that. Some of the top 30 have already been told to instruct Agents.
I spoke with one of them this morning and he confirmed that it was indeed correct.
@WSTT, whilst that claim about NAMA might be correct, the Minister’s relationship with NAMA is supposed to be more formal than simply picking up the phone and barking instructions down the line. The Minister can issue Directions pursuant to section 14 of the NAMA Act and has done so on a few occasions, most recently with the accelerated acquisition of loans following the Big Bang announcements on September 30th last year.
Of course, political pressure can be brought to bear in other ways but you would hope that NAMA’s board which includes outsiders like the former IMFer Steven Seeling for example would independently challenge any pressure which might knock NAMA off course.
The London market is purring at present so selling assets there certainly wouldn’t fall into the fire sale category. Though the risk is that if NAMA developers bring several €bn of assets onto the market at the same time, they won’t secure optimum prices. That said, London is a big market and a few €bn shouldn’t distort the market that much.
Is this the same mole that inferred the tsunami? Was your contact in the 30 at all concerned?
@WSTT, for completeness on the Twitter story on its establishment of a European base, the Irish Independent today claims that Twitter’s decision on a European HQ is still pending. The IDA is quoted as claiming that the London recruitment may not be for a HQ and that Dublin is still in with a chance. There is reference to the article about the fact that Twitter generates tiny income – USD $50m is quoted but I think that is revenue as the company still makes substantial losses – and the fact that our corporation tax rate might not be relevant. That would ignore the fact that Twitter is desperately trying to monetise its product – doesn’t seem too difficult to me and I am amazed there is little advertising on their site. And Twitter is valued at USD $4bn for a reason – its future profitability once it has worked out how to monetise its product to its 250m users, should be colossal.
http://www.independent.ie/business/irish/twitters-european-hq-still-in-our-reach-ida-claims-2624451.html
Contrary to the perception provided in these reports, rents are not stabilising.
There will be an announcement in the next two weeks which will give the truth to rental levels in the inner south Dublin market. I have already made reference to it in responses to Marie Hunt of CBRE. It refers to a letting of 120,000 sq. ft. which is being finalised at present.
The lease is sub €10 per sq. ft. and it reflects the current levels from Clonskeagh to Loughlinstown. A fall of more than 60% from 2006.
That is the reality.
@WSTT, is it any wonder that there might be an imminent shortage of commercial space in certain parts of Dublin when the Irish Times today claims, citing court proceedings last year, that it will cost €295 psf to *finish out* the Liam Carroll building that was at one time destined to be the Anglo HQ. Unless there is major structural damage to the existing construction, then is it not scandalous that building costs are still so high. Remember that at present, the land has been bought, planning permissions and architectural works completed and the bones of the building have been constructed. And it will *still* cost €295 psf for a 230,000 sq ft building (€68m) to finish it out. The Irish Times claims that NAMA would need rent the building for €35-40 psf to justify the expenditure – no Nyberg! There might be some detail missing from the article but on the face of it, the finish out costs look ridiculous.
Irish Times – http://www.irishtimes.com/newspaper/commercialproperty/2011/0420/1224295054829.html
Background to the building and its planning permission – https://namawinelake.wordpress.com/2010/09/03/liam-carroll%e2%80%99s-anglo-hq-receives-planning-permission/