A privately owned property company, Markland Holdings, has paid £9.5 million (€12m) for a Dublin office block in a deal which underlines the strength of the investment market in the city centre.

Gandon House, the five-storey second generation building on Amiens Street is across the road from the IFSC and is currently producing an annual rent of £457,106 (€580,405), giving an initial yield of 4.4% after normal acquisition costs and an equivalent yield of around 8 per cent.

A rent review of the third and fourth floors is outstanding at the moment and is expected to bring the yield up to over 6 per cent. The rent on a third floor will be reviewed next year.

Some 97 per cent of the 38,254 sq ft block is let under long leases to the Office of Public Works and occupied by the Department of Social Welfare. The leases date from the late 1970s and have between 11 and 13 years to run. Part of the second floor is let under a separate lease to OOCL, a freight transport company.

The building has been upgraded in recent years and includes two 13-person lifts, air-conditioning and parking for 30 cars. It is just across Amiens Street from the IFSC blocks occupied by McCann Fitzgerald and Arthur Andersen and close to Connolly mainline rail and DART stations.

"The strong price achieved for this building underlines the continuing demand for office buildings with good covenants in the city centre," according to John Moran, of Jones Lang LaSalle, who handled the sale on behalf of the Construction Federation Operatives Pension Scheme.

Aidan Scully, managing director of Markland, said the building offered tremendous potential for growth with the passing rents of around £11 (€14) per sq ft, well below the £40 (€51) within the IFSC. He said Gandon House had redevelopment potential in the long term.

Palmer McCormack acted for Markland.