It was the late Brian Lenihan who, as former Minister for Finance, drew our attention in September 2009 to historically high Irish property yields which he claimed indicated we were close to the bottom of the market. Alas that was not the case, and tends not to be the case in a severe recession where both rent and capital prices come under pressure. A report yesterday by property company Knight Frank shows that Ireland still has the highest yields (simplistically rent divided by the value of a property) in the EuroZone for prime office space. At 7.25%, we are a shade above fellow PIG, Portugal where prime office rents in Lisbon return a yield of 7%. Top of the table in Europe generally is London’s West End at 4%, where NAMA Top 10 developer, the Cosgraves recently sold a landmark building at a reported yield of 4.4% – if a yield of 4% had been achieved there might have been an extra €20m generated from the sale. The City of London is returning 5.25%. Outside (what was once thought of as) the currency safety of the EuroZone, there are far higher yields available – Kiev where there are a number of Quinn Property assets is returning 12%, Moscow where Avestus (formerly Quinlan Private) was active is returning 9.5%.
Interestingly the report puts prime office rent in Dublin at €376 psm (€35 psf) which makes Dublin more expensive thanMadrid, Vienna, Brussels and Munich. The report’s headline graphic indicates that Dublin is still in for some further correction to rents/capital values.
Elsewhere the report shows that prime shopping centre yields in Irelandare the highest in the EuroZone at 7.75% and fourth highest across all cities surveyed (IMFed, politically-troubled, economically-floored Kiev is at 13%, Moscow at 10.5% andBucharest at 9%). Because Ireland uses the idiosyncratic “Zone A” method for calculating retail rent (first 7 metres of retail space from the front of the store, the next 7 metres is half that rate and so on), it is not possible to see how we compare with other European countries – apart from Ireland, only the UK uses the Zone A metric, maybe it’s time for Ireland to unhitch itself from the UK?
NAMA Wine Lake 