Jones Lang Lasalle (JLL) has today published its commercial property series for Ireland for Q2, 2012 – the report should be available shortly on the JLL website but for the time being, there is Jack Fagan’s report in today’s Irish Times. The JLL series is one of the two Irish commercial indices referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page. The other quarterly Irish price series is published by SCSI/IPD and will be available on Tuesday 24th July at 3pm; because it is generally published after JLL’s, it is not used here to help compile the NWL index, but the SCSI/IPD index does historically show a very close correlation with JLL’s.
The JLL Index shows that capital values fell in quarter two, 2012 by 2.3% – this means that with the exception of Q4,2011 Irish commercial property has declined in value for 19 of the last 20 quarters and the aberration in Q4,2011 when a 1.2% increase was recorded was due to the exceptional measures set out in Budget 2012 – the reduction in stamp duty on commercial transactions from 6% to 2%, the abandonment of proposals to abolish Upward Only Rent Review terms in pre-February 2010 leases and the enhancement of capital gains arrangements for commercial property held for several years.
Overall since NAMA’s Valuation Date of 30th November, 2009 prices have declined by 23.8%. Commercial prices in Ireland are now 65.7% off their peak in Q3, 2007. On an annual basis prices are down by 7%. The NWL index is now at 806 which means that NAMA needs to see a blended increase of 24.1% in property prices across its portfolio to break-even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss). NAMA acquired loans underpinned by €9.25bn of Irish commercial property. The Q2, 2012 decline of 2.3% means that the underlying NAMA property has declined by €166.5m in Q2, 2012 (€9.25bn minus 22% to Q1, 2012 adjusted for 2.3% in Q2, 2012) – so much for NAMA claiming the market was stabilizing!
Rents decreased by 1.4% in the quarter, reversing the 0.7% increase in Q1, 2012 which was itself the first increase since Q2,2008. This is unsurprising as secondary market rents have continued to slide even though there are indications of prime rents stabilizing.
UPDATE: 24th July, 2012. The “other” commercial index for Ireland has been published today by the SCSI/IPD and is available here. It shows commercial property prices fell by 2.3% in Q2, 2012 with retail falling down 2.2%, office by 1.5% and industrial by 1.5%. Prices are now down 65.8% from peak, which compares with 65.7% shown by the JLL index.