MarketReturns: The Henry and Mary streets area of Dublin outperformed the Grafton Street area in 2007, with rents in the northside shopping area growing the strongest according to new figures from the IPD.
The Grafton Street area experienced a rental value growth of 2.3 per cent in the last quarter of 2007 with a growth figure of 8.9 per cent over the entire year.
The star performer, however, was the Henry and Mary streets area, which experienced rental growth of 2.6 per cent in the last quarter and 17.2 per cent growth over 2007 in total.
When it came to total returns in 2007, again the IPD found that the Henry/Mary streets area outshone Grafton Street. Standard retail in Grafton Street experienced total returns of 13.6 per cent while the Henry/Mary streets area reported returns of 18.2 per cent. These figures are significantly down on 2006 (31.2 per cent for Grafton Street and 32 per cent for Henry/Mary streets).
Capital growth for Henry/Mary streets was 15.7 per cent in 2007, compared to 10.9 per cent for Grafton Street. It is only in terms of income return that Grafton Street outperformed Henry/Mary streets. Grafton Street saw a 2.5 per cent increase in income returns, while Henry/Mary streets say income returns of 2.2 per cent.
All retail saw improvements in rents in the fourth quarter with the strongest growth in prime locations, according to the SCS/IPD index.
The index put overall commercial property returns at almost 10 per cent - outperforming bonds and equities by a significant margin.
While commercial property delivered a robust return in 2007, investor uncertainty last year created a stagnant market with net investment turning negative in Q4, says Angela Sheahan, research manager with IPD.
IPD's fourth quarter 2007 report paints a clear picture of the sharp slowdown experienced in all sectors in 2007.
The first half of 2007 was "actually very strong" with rising returns but there was "quite a significant" fall in all sectors in the last quarter, says Sheahan.
The report indicated that overall returns from commercial property were up 9.9 per cent in 2007, compared to 27 per cent in 2006. Total returns in 2007 were below the long-term average of 14.1 per cent, according to IPD. Capital growth continued to drive total returns with income returns at 3.9 per cent compared to 5.8 per cent capital growth.
The IPD index illustrates how all sectors are significantly down on 2006. But retail and offices were the best performers in both years.
Dublin performed much stronger than the provinces. Retail rental growth in Cork in 2007 was 6.1 per cent, while in Limerick it was 1.8 per cent.
Shopping centres in Dublin experienced modest rental growth of 3.6 per cent, but fared significantly better than shopping centres outside of the capital, which experienced rental growth of just 0.4 per cent.
The most volatile area was offices, which had the highest returns in the first and third quarters and the sharpest decline in the fourth quarter, says Sheahan.
In the office sector, rental growth was the strongest in the city centre locations. Dublin 4 saw rents increase by 2.3 per cent, while Dublin 1 and 2 experienced growth of 1.3 and 2 per cent. Total returns in the office sector were 8.2 per cent in Dublin 1, 12.4 per cent in Dublin 2 and 9.9 per cent in Dublin 4.
Also speaking at the launch of the report, Simon Fairchild, director of IPD, gave an overview of the UK market, which experienced total returns of 4.4 per cent in 2007.
Total returns plummeted in Q4 in the UK with all sectors turning negative, ending 27 consecutive positive quarters. Describing the UK market as much more "transparent", Fairchild said this "sharp correction" comes after "six years of consistently rising values".
