OVERALL rental values in the commercial property market arose last year by 5.9 per cent, according to the latest Lisney Property Rental Indices. The figure is ahead of the 3.71 per cent return recorded last year by the Irish Property Index.
Lisney said it would expect its indices to show slightly higher returns due to their reliance on the prime elements of the main sectors. While the agency was in broad agreement with the general trends reported by the Investment Property Databank, it had evidence of higher rental growth in the office sector.
The report shows that while equity returns last year outperformed property, the property sector still provided a "more than acceptable return of over 10 per cent". This return was well in excess of inflation and underlined the strong record of the unit linked property market over the past two years.
The report charts the continued improvements in the office market during 1995 when the vacancy rate fell below 5 per cent. Rent levels maintained their growth over the second half of the year recording an overall increase for the 12-month period of 9.1 per cent. The agency said it expected the vacancy rates had reached their lowest point and would begin to increase again towards the end of this year as companies move to the Custom House Docks to occupy space currently under construction.
The indices found that rents for Georgian offices rose by 6.7 per cent over the year. These offices had been affected by the generally strong performance of the office market as a whole and the low interest rates which had attracted purchasers and owner-occupiers. Lease terms had hardened slightly and landlords were now resisting break options and rent-free periods. However, leases tended to be between two and five years and were generally in office suites rather than entire buildings.
Lisney said Henry Street activity continued to improve with Zone A rents increasing to £161 per square foot, narrowing the gap with Grafton Street. However, premiums had not featured in any significant way.
The report also highlighted the paradoxes in the industrial market.
