This entry examines a report published last month by the Royal Institution of Chartered Surveyors – RICS, a worldwide trade body which includes valuers and estate agents. The report covered commercial property markets across the globe for the first six months of 2011 and also surveyed estate agents for their projections for Q3,2011. There were 64 responses from Ireland’s property community. Ireland is again in a different league, and again not for the right reasons, and is regularly joined at the bottom of the league tables by Portugal, Greece and Spain.
The summary report from the RICS is available here and there is more detail on Ireland in this detailed chapter from the report. There are specific comments on the Irish market, which covers Cork, Dublin and some regional towns, from respondents in this section of the report. All of the sections of the report can be accessed from the RICS at this page.
The graphs in the report show the net balance scores of responses (calculated by taking the percentage of respondents who indicate an increase, minus the percentage of respondents who indicate a decrease eg Assume 50% of respondents indicated an increase in rents, 30% indicated they did not change, and 20% said they fell, the net balance would be (50-20) +30)
(1) Rent expectations for Q3, 2011. -60 (lowest expectations for retail property)
(2) Capital value expectations for Q3, 2011 -80 (lowest expectations for industrial property)
(3) Investment demand for Q3, 2011 -20
(4) Occupier demand in Q2, 2011 -10
(5) Available space in Q2, 2011 +40
(6) Investment inquiries in Q2, 2011 -10
(7) Development starts in Q2, 2011 -40
John Moran, managing director of Jones Lang LaSalle in Ireland is quoted in the report as saying “The Irish government’s proposal to retrospectively ban upwards-only rent reviews has crippled the investment market leading to a cessation of activity and further falls in value”
Marie Hunt, Director of Research at CB Richard Ellis said “The Dublin investment market is on standby until such time as the Government produce draft legislation spelling out their intentions regarding rent review reform. There were only three transactions signed in the first half of 2011 with two of those comprising special purchasers (buildings bought by their main occupiers). The occupier market is holding up very well with occupiers doing deals to take advantage of more competitive terms and conditions including rents which are now more than 50% down from peak levels”
David Potter, a director at Savills said “Lack of funding and uncertainty over rent review situation is major impediment to investment transactions”
The Upward Only Rent Review question (reported in some detail here and here), remains vexed and clouded in confusion. The Department of Justice and Equality has not offered any comment on the 17th July 2011 Irish Sunday Times report (not available online without subscription but detailed in an update to this blogpost) which claimed to have details of the Bill expected to come before the Dail in September or October 2011. There was a meeting between Minister Shatter and representatives of a group of tenants at the start of August 2011 (reported as an update on here) but we appear to be none the wiser as to the provisions of the new Bill.
Lack of funding remains an issue, and unlike the British government with its Project Merlin deal which forces banks to lend and keeps tight tabs on reporting compliance with targets, inIreland we have a vague-ish €10bn of new lending per annum commitment from the pillar banks apparently, but there is seems to be precious little oversight of performance. Last year, Barclays was said to have advanced €40m for the purchase of Irish property but there remains a general repulsion by foreign banks towards lending for Irish property at present.
Whilst the RICS report does paint a downbeat picture of commercial property in Ireland, other parts of the world are booming – Brazil, Poland, Russia and Malaysia seem noteworthy.
NAMA Wine Lake 
I don’t understand why the Government is involved in rent reviews at all – surely the commercial rental market can look after itself.
The surveyors who played a large role in creating the property and rental bubble want to prevent the economy recovering by continuing to charge tenants a multiple of market rents. This group of property professionals have behaved recklessly and events have shown them to be utterly incompetent. To quote the head of NAMA Frank Daly “At a time when many lay people with no great knowledge of the property business were becoming increasingly alarmed at the disconnection between the prices being paid for properties and the intrinsic long-term economic value of those properties, could the two professional bodies not have signalled some concern at what was taking place?” @39grange – the commercial property market wrecked the economy thats what happened when the Government did not get involved.