Property power-house and NAMA valuation panel member, CBRE has issued its twice-monthly report on the commercial property market in Ireland, with a footnote on London and Belfast. The 6-page report is available here (and the previous report in September 2011 is available here) so it’s not an epic read, but here are a few observations from the report which you might find surprising
(1) Letting activity in the Dublin office market is relatively buoyant. Tenants are taking advantage of lower prices to move to better value accommodation.
(2) Rumours of imminent shortages of Grade A office accommodation in central Dublin might be premature as CBRE report “while we have been eluding (sic) to an emerging scarcity of Grade A buildings of a certain size in Dublin 2/4 for some time now, it is now evident that this will be alleviated to some extent by modern buildings being vacated and coming back on the market to let”
(3) Rents (headline) are still declining in three of the four Dublin office markets but are supposedly remaining at €323 psm (that’s €30 psf in old money) in the centre. There isn’t very much in the report on inducements given to tenants which might reduce the headline rate but two recent central Dublin transactions reported in the Irish Times – US company “Engine Yard” renting space at The Warehouse on Barrow Street and UK company AA Hamilton College renting space on St Stephen’s Green – suggest actual central Dublin rates are €20 psf.
(4) Retail rents seem be flat since the last report, even though the evidence from the long-anticipated Dundrum Town Centre reviews seem to have pointed to a downward trend in retail rents.
(5) There have been only four investment transactions of note signed in Irelandin the first nine months of 2011 – in other words the market is dead – and uncertainty about the Upward Only Rent Review issue is being blamed. There has not been any further official word from Minister Shatter as to when the new Bill will come before the Dail, the last statement on the matter referred to “late October/November”. If I were a betting person I’d say we’ll be lucky to see it in this Dail session which breaks up in mid-December 2011.
(6) Prime yields across all sectors of investment property range from 6.5% to 9.5%. Given the general economic uncertainty, crisis in the EuroZone, absence of credit and the Upward Only Rent Review issue, it might surprise you to see yields still relatively low.
(7) As regards Irish development land CBRE says there is “reasonably strong demand prevailing for lot sizes of less than €2 million in good locations” so there’s life in the old Irish development dog yet
(8) The strong performance of the Irish hotel sector in 2011 is certainly under-reported in the general media, but CBRE reports that on most metrics things are stabilized or picking up for the hotel sector. CBRE is presently marketing the Morrison Hotel in central Dublin on behalf of, ultimately, NAMA.
(9) The London investment market is still buoyant and West End yields are put at 4% and the City at 5% (down from 5.25% in the previous CBRE report). A number of sub-4% transactions are noted in London’s West End – are you hearing that NAMA CEO, Brendan McDonagh, 3% is possible in London and if you remember that a yield is simplistically rent divided by value, both the numerator and denominator can change. It would be very interesting to establish the yield on the Boots store transaction on Oxford Street reported last week where Paddy McKillen was the seller.
(10) Yields in Belfast are going south compared with just two months ago but at 6-8.5% are still stronger than in Dublin. Belfast rents appear to be just over half those in Dublin, so there is probably less downside on Northern rents, but the economic outlook for the North is not great. If the North successfully convinces Westminster and Brussels to allow it reduce its corporate tax rate from 26% to 10% (yes 10% is Peter Robinson’s target, not 12.5% as pertains in the Republic) then we may see far greater convergence of prices between Dublin and Belfast.
NAMA Wine Lake 
Don’t hold your breath on the Corporation Tax cut – the North’s Fi Min Sammy Wilson has pushed it at least four years down the pipe.
http://www.bbc.co.uk/news/uk-northern-ireland-14980289
“”I don’t believe that we are going to see a reduction in the rate of corporation tax within the lifetime of this assembly – it will be after that”.
“There has been no provision made in the current four-year budget for the devolution of corporation tax so even if we got it down to say a figure that is manageable there would still be an impact, unless of course it is phased in or deferred.”