Jones Lang Lasalle (JLL) has today published its commercial property series for (the Republic of) Ireland for the three months ending 30th September, 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 23rd October 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 one, 2012 by 2.4% – this means that with the exception of Q4,2011 Irish commercial property has declined in value for 20 of the last 21 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 25.6%. Commercial prices in Ireland are now 66.5% off their peak in Q3, 2007. On an annual basis prices are down by 5.2%. The NWL index is now at 791 which means that NAMA needs to see a blended increase of 26.4% 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 Q3, 2012 decline of 2.4% means that the underlying NAMA property has declined by €166.5m in Q3, 2012 (€9.25bn minus 23.8% to Q2, 2012 adjusted for 2.4% in Q3, 2012) – so much for NAMA claiming the market was stabilizing, but I see that JLL is claiming the pace of decline is moderating but if you exclude the fillip following the December 2011 budget announcements, we are still back at c10% per annum declines.
Rents decreased by 0.5% in the quarter following a 1.4% decrease in Q2,2012 and that was after a 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. Last week, Lisney reported that commercial rents declined 2.4% in Q3,2012.
UPDATE: 1st November, 2012. The SCSI/IPD index for Q3,2012 has been published and although the quarterly decline registered was 1.7% overall which was less than the 2.4% recorded by JLL, the peak to trough remains remarkably similar with SCSI/IPD at 66.4% and JLL at 66.5%. According to SCSI/IPD, retail fell by 2.2% in Q3,2012 whilst offices fell by 1.3% and industrial fell by 1.8%.