Market and views
Irish Commercial Property Review - May 2010
The Irish property market remains very weak. Concerns about the economic backdrop, limited liquidity, changes to the law in relation to lease rent-review provisions, and the impact of the National Asset Management Agency (NAMA), are all overhanging the market. However, the relatively high yield now available has led to some increased interest in the market, albeit that this has been slow to translate into transactions.
Retail Market - Retail rental levels have declined and there has been some distress among occupiers. There have been concerted efforts by tenants to negotiate rent concessions, but, at the same time, new interests are coming through, albeit seeking to pay very low rents.
Industrial Market - Activity levels remain low, although there is some interest coming through for purchases, given that values have fallen sharply. Industrial investments now offer high income yield.
Office Market - In the office sector, the occupier market remains weak, but viewing levels are up, and some latent demand is coming through on the back of the competitive terms now on offer as landlords seek to resolve letting voids.
Fund Manager Outlook
As the economy moves from deterioration to stability, there is evidence too of stabilisation in the value of prime properties, with yield levels now probably at a cyclical peak. At the same time, continued pressure on rental levels means that the value of more exposed assets continues to be under pressure. This means that there is continued positive divergence in performance of prime assets over secondary, as the market discriminates more efficiently. The sharp fall-off in values that has already been suffered, and our fund’s spread of prime assets should see it outperform more vulnerable sectors of the market.