Record low yield on £3m sale of Fiat

Investment yields are continuing to fall because of the shortage of good quality properties on the Dublin market.

A private investor has just paid slightly over £3 million for the Fiat headquarters on the Naas Road in west Dublin, in a deal which will give him a net yield of 4.4 per cent. The motor company will have the right to opt out of the lease in the 10th and 16th years.

The initial return is one of the lowest recorded for an office investment in a secondary location, and underlines the immense scarcity of investment properties. Although a number of high value transactions have already been completed, and more are in the pipeline, there has been a notable slowdown in the volume of sales this year because of the limited reinvestment opportunities.

In this climate, it is hardly surprising that a great number of institutions and private investors have diverted funds on to the UK market, where yields are generally better. Most of the investment activity in the Dublin market is confined to pre-funding office and industrial developments.

The two year old Fiat building, at the intersection of the Naas Road and the M50, is currently let at £145,000 per year. The three-storey building has 12,100 sq ft of space, of which 1,500 is used as a display showrooms. There are 45 on-site car parking spaces.

David Clarke of Harrington Bannon, who handled the sale, estimates that the office rent works out £11.50 per sq ft. This figure suggests that there is scope for a rent increase when the first review takes place at the end of 2002.

In the meantime, many of the major players in the investment market are busy analysing the sale and leaseback deal for four Microsoft buildings which has just been brought to the market by Colliers Jackson-Stops.

With the lot sizes ranging from about £5 million to £22 million, several private groups, as well as institutions, are likely to chase the investments. Microsoft's decision to opt for five year break clauses on each of the buildings is unlikely to put off many of the major players in the investment market.

The largest of the company premises, an 87,000 sq ft European Operations Centre in Leopardstown, is expected to sell for over £20 million.