We should get the Q4, 2011 Irish commercial property price indices from both Jones Lang LaSalle and SCSI/IPD, in the next fortnight. I would wager that prices may have risen very slightly in the quarter for the first time in four years – the JLL index has consistently fallen every quarter, from a peak of 1,468 in Q3,2007 to 521 in Q3,2011; the reason for a slight rise would be Minister for Finance, Michael Noonan’s decisions in Budget 2012 which he did tell us about on the day – the reduction in stamp duty on commercial property transactions, the abandonment of proposals to abolish upward only rent review clauses in pre-February 2010 leases and enhancements to capital gains to encourage purchases. On the other hand, wider economic measures have tended to be weak, so it any increase is likely to be minimal. Commercial property prices have fallen 65% from peak already, and the forecast on here was that prices would decline slightly in 2012.
Today the National Competitiveness Council (NCC) published its annual report for 2011 in which it anticipates commercial prices falling further, although the NCC report suffers from an absence of quantitative support for its claims. What the NCC does do is to call on NAMA to become more transparent in its operations, publish more information on its portfolio and to dispose of property in the Irish market. NAMA is seen as one of the main obstacles preventing commercial property falling to a more competitive level. The NCC claims that commercial property prices in Ireland are still too expensive by comparison with competitors and says the prices are not justified by the “underlying potential for adding value or earning market rent”. Again, there’s little in the way of figures to support this, and although I have not seen recent comparisons, this time last year it was reported that commercial property prices in primeBelfast were still nearly twice those inDublin.
The NCC calls on NAMA to get on with disposing property, and remember that unlike the residential property market where despite the hysteria, NAMA is actually a small player, in the commercial market NAMA controls approximately €6-7bn of assets which is very significant indeed. The NCC also calls for price information (sales and rental prices) to be publicly registered, something we may get from mid-2012.
So if commercial property is presently 65% off peak, how low can it go? The Central Bank had an adverse scenario of 70% in its stress testing last March 2011, which would represent a 14% drop from today’s prices (100 at peak, 35 today, 30 bottom representing a 70% fall from peak, a drop from 35 to 30 represents a 14% decline). But who knows, it would have been helpful if the NCC had quantified values based on “underlying potential for adding value or earning market rent
NAMA Wine Lake 
1. The mass slaughter of serfs will commence immediately. No mercy will be shown. We will never allow these serfs market rents.
2. The Fine Gael and the Labour Party will be looked after in the usual way. We are indebited to the Fine Gael Landlords Association/PII.
3. The surveyors will continue to produce statistics showing 99.99% of landlords are granting 75% reductions. These figures will be audited by Ernst&Young.
4. The surveyors will continue to lobby to reintroduce the old arbitration system, of secret agreements,side agreements,straw tenants ,bungs,kickbacks, etc etc.
5. Our rentboys in the broadsheet media will continue to publish our puff pieces and the usual propaganda. Otherwise we will withdraw all advertisements and set up our own free internet property portal.
6. The surveyors will continue to lobby to reintroduce the upward-only rent reviews in all future commercial leases.
7. We are indebited to our independent property academics. They will be looked after in the usual way.
8 We will continue to distribute the serfs private and confidential information to cartel members and leak selected bits to our rentboys in
the broadsheet media.
9 Market rents must never be allowed in Ireland.
T O’Neill
The Cartel
@wb, I may be sorry that I asked, but ….. Who are the cartel?
The people who own great big tracts of land in County Dublin for a start.
@NWL
A simple question. You may have the answer.
Does the report state by how much the individual council members reduced their total remuneration (incl pension entitlements) last year?
What was the personal contribution of the council to increasing Irish competitiveness?
@Joseph, no! It still remains a challenge to establish the remuneration of people in our state bodies, agencies and quangos. And you’ll frequently be told by the ministerial department that there is no fee at all! But what it means is that there is a fee but it is charged sewhere, as are expenses and other allowances and benefits. So no answer, and we’re not likely to get an accurate answer anyway.
The Irish property crash consisted of both a residential and commercial property crash. This did not happen by accident. Ireland has the most ruinous, anti-tenant commercial lease law in the world i.e. upward only rent reviews tied to long leases.
In my opinion there is and was a cartel in operation in the Irish commercial property market, with estate agents exchanging clients confidential information,without their consent, and working in concert to maximise rents payable.
They and their landlord clients imposed this ruinous commercial lease law on our country.
I urge you to immediately instruct the competition authority to raid some of these commercial property estate agents premises and confiscate ,files,diaries,laptops,mobile phones etc to gather information of this cartel.
1 We recommend a temporary halt to the slaughtering of massively overrented tenants until the government pass “our”legislation. Once “our” legislation is passed slaughtering will recommence with vigour–no mercy will be shown to any of these serfs
2 The Society of Chartered Surveyors will continue to produce “unbiased statistics” to show 99.99% of all landlords are granting tenants rent reductions.
3. Congratulations to CBRE on their excellent research on retail premises in Wexford Town –an excellent unbiased piece of scholarly work. Hats off to a wonderful company. They will now proceed with their next in- depth study of retail premises on Achill Island to be following by the third of the trilogy , the Aran Islands. I understand tenants organisations will be very surprised with their findings.
4 We highly recommend all members to circulate the excellent objective article in today’s Irish Times by the distinguished Irish economist Pat McArdle titled ” Changing rent reviews will have serious consequences”. There will be many more full page “objective” opinion pieces over the next number of months.
5 In 2008 our members established the fifth highest rents in the world on Grafton St. When this current blip is over we intend to reintensify our efforts to establish the highest rents in the world in Ireland. This would be a great boost to national morale–world champions.
6 The Society of Chartered Surveyors are organising weekend retreats and free trips on the Orient Express for our politicans/legislators to convince them of the urgent need to reinstate UORRs again in all future leases and no more tampering with our superb arbitration system
7 We will continue to distribute the serfs private and confidential information among the cartel members. We will also leak to our media contacts selective information to smear some awkward serfs.
T O’Neill
The Cartel
@wb, Naw, I don’t think so – Agents work for fees. They don’t care about the price level the client achieves. It’s all about their fees, which are collected on both sides, one from the tenant and one from the landlord. In a competitive commercial property environment, the price finds market level.
@ WSTT
The Society of Chartered Surveyors are the most anti-tenant organisation the world, and the mouthpiece for their landlord paymasters. Tenants are serfs to that crew. They are the property professionals/experts that presided over the greatest property crash in the history of mankind and never raised any warnings.
@wstt
How can the price find market level if the price is fixed and cannot drop due to UORR. clauses.
@WB The scenario you paint has merit if applied to this definition of a Cartel –
A formal organization set up by a group of firms that produce and sell the same product for the purpose of exacting and sharing monopolistic rents. The intended purpose of a cartel is to reap monopoly profits by artificially restricting output and thus driving the price above the level that would prevail if they remained in competition with one another. This they normally accomplish by agreeing on a relatively high common asking price for their product that none of the member firms will be permitted underbid…
If the cartel agreement were a legally enforceable contract, then the government and the court system could be counted upon to do the enforcement job for the cartel, and in many fascist and authoritarian countries this has in fact historically been a general practice. However, in the United States, Great Britain and most other advanced democratic capitalist states, cartel agreements are normally either unenforceable in the courts or are held to be positively illegal as “restraints on trade” that are contrary to the public interest because of their adverse effects on consumers. Even in those countries that outlaw private cartels, however, it has often been possible for politically powerful industries to secure the “cartelization” of their industry in a back-door fashion. ..
Independent regulatory commissions in fact have often functioned mainly to serve the economic interests of the dominant high-cost firms in the industry being regulated.
Dictionary of Political Economy
@omf, He was talking about rents…. A cartel controls prices. If the Dublin landowners did that, then they haven”t made a very successful cartel.
“Even in those countries that outlaw private cartels, however, it has often been possible for politically powerful industries to secure the “cartelization” of their industry in a back-door fashion”
One would have to consider the possibility that the powerful property industry may have run what was effectively a cartel in Ireland. There were and are a number of large estate agents who ran the show with their developer friends. The investment companies pension Trusts etc. were the other major player and if proven to have acted together could effectively have operated a cartel.
The surveyors would be the information supplier as often one agent is acting for a tenant in one deal and on the next deal they are on the other side. In many cases the tenant is providing their yearly accounts to the agent for rent review/rent reduction purposes. It would be very easy then for the agent to pull that file when they are acting against the tenant or for a particular landlord on the next deal. Even easier would be a quick phone call to the other agent etc.
“Independent regulatory commissions in fact have often functioned mainly to serve the economic interests of the dominant high-cost firms in the industry being regulated.”
Unfortunately in Ireland the Society of Chartered Surveyors are self regulatory so if a tenant makes a complaint it is ignored. I know of a least one case where a large English chain made such a complaint and got no satisfaction. In England there would be a full inquiry of any complaint.
The way I would see this developing is with a full judicial inquiry into how rents in Ireland got so grossly out of kilter with rents in the rest of the world. All it needs is for someone to lift the stone and the cockroaches would come crawling out. It also raises the specter of massive compensation claims for tenants who were the victims of this fraud.
@JH good luck with that,compensation claims,who would pay.It is/was a game of course there were lots of abuses,was “key money” not also prevalent.
The National Competitiveness Council with the troika on their back want to see prices come down whether it is electricity, rents or rates. Keeping rents artificially high for the benefit of landlords will not assist the economy to recover. Tenants have complained to the NCC about the above market rents and they are looking at the possibility of a case. Tenants should write to the council expressing their concern about being over-rented. The NCC have a responsibility to investigate the issue.