There will be a broad welcome for IPD's latest findings as the Irish market has fallen by an unprecedented 56.3 per cent, writes JACK FAGAN

THE IRISH commercial property market has delivered its first positive quarterly return in over two years with a modest 0.4 per cent growth in Q1 2010.

The good news was described by researcher Investment Property Databank (IPD) as “the first step on the road to recovery for the Irish market”.

The return to a positive performance was driven by the shallowest quarterly capital depreciation – at -1.8 per cent – since the Irish market turned in the final quarter of 2007. The tail-off in capital depreciation reflects a positive yield impact of 80 basis points (0.8 of a percentage point) while rental pressure eased to its lowest quarterly decline since this time last year at -3.3 per cent. All property initial yields expanded by a fractional three basis points to 8.2 per cent.

There will be a broad welcome for IPD’s latest findings given that the Irish market has fallen by an unprecedented 56.3 per cent since it peaked in the third quarter of 2007.

Within the main retail segments during the first three months of this year there was a significant quarter-on-quarter improvement in Henry Street and Mary Street, with capital depreciation easing from -6.9 per cent in Q4 2009 to -1.3 per cent. Rental pressure softened from -10.5 per cent to just -0.3 per cent over the same period. By comparison, Grafton Street delivered a -1.3 per cent capital depreciation in Q1 2010, reflecting a shallower 160 basis points deceleration, while rental value falls eased by 260 basis points to -1.0 per cent.

Within the office sector, the dominant central Dublin market showed a -2.2 per cent capital depreciation, driven by the strongest positive yield impact among all segments at 1.4 per cent. This reflected improving sentiment and was aided by a 300 basis points improvement in rental pressure quarter-on-quarter at -4.8 per cent.

Sasha Thomas, service manager for Ireland at IPD, said the positive performance in the first quarter was the first step on the road to recovery. For two consecutive quarters both rental value growth and yield pressure had eased. “Overlaid upon this are signs of recovery in Ireland’s economy following Bank of Ireland’s economic outlook indicating that GDP was expected to turn positive in Q1. With both macro-economic and property fundamentals improving, the indications are that the worst of the property recession is, possibly, behind Ireland.”