Market shows signs of life

THE COMMERCIAL property investment market is finally showing some signs of life again, according to Peter Stapleton, managing director of agent Lisney.

He said property values continued to fall in the second quarter of 2009 but the pace of change appeared to be moderating. Yields were now increasing more slowly while rental values continued to be under downward pressure.

Stapleton cited the recent sale and leaseback of seven Bank of Ireland branches and mentioned the availability of another tranche of AIB retail buildings and the Royal Liver investment portfolio mainly on Grafton Street, Henry Street and Dawson Street.

For greater levels of activity to return to the investment market, he argued that increased confidence was required in each of the occupational markets.

In these markets, the first half of 2009 was a story of tenant default, rent reductions and decreases in rental values.

“When rents find a sustainable level, investors will return to the market in greater numbers with the confidence that future incomes are more secure.”

The Lisney chief executive said that yields in each of the commercial sectors were above their long-term averages and when viewed against the backdrop of low interest rates, one would expect more buyers seeking to invest. However, some private investors were seizing current conditions seeking to acquire off-market deals. Some vendors, particularly those who needed to sell, were being quite creative to help potential purchasers secure financing with innovative measures such as vendors’ loans, rental underwrites and extended closing periods.

He said over the last quarter we have slowly seen a greater number of overseas investors look at Ireland, particularly Dublin. Their main requirement tended to be new, well-let offices with 15 years or more left on leases. The reality of the market was that the supply of this type of product was relatively slim. The spectre of the National Asset Management Agency (NAMA) that had loomed over the property market for the past few months was edging closer to active operation.

“Many investors believe that when NAMA has acquired the first tranche of substantial loans, more opportunities will emerge as funding should improve and there is some vision of the commencement of some increased occupational activity, albeit at a moderate and cautious pace.”