FINANCE: Irish property returned 8.5% in Q2, its highest level since 2006, according to the IPD/SCSI Ireland Quarterly Property Index.
This is an acceleration from the 7.2% total return seen in Q1.
The office sector continues to dominate the Irish property recovery, as a shortage of supply of prime Dublin stock pushes up rents, and ongoing international investor demand continues to push up capital values.
Capital values of offices increased by 8.2%, almost double retail’s 4.2% growth. Industrial capital values lagged behind with 1.7% growth.
Office rents increased by 11% in Q2, compared with zero growth over the period for retail property and just 0.1% for industrials.
So great is demand for office properties that even aging stock performed strongly during the period: offices built between 1970 and 1979 returned 10.9% in Q2, eclipsing the performance of offices built between 2000-2014, which returned 8.7%.
The second quarter was the first time that retail rents had not shown a decline since 2008, reflecting an improving Irish macroeconomic outlook.
Provincial retail, one of the sectors of the property industry that suffered the most from over-building and high void rates, gave a total return of 2.6% during Q2, up from 2.2% the previous quarter.
Irish property’s 12-month return figure now stands at 26.6%, outstripping the UK’s 17.6%.
Colm Lauder, senior associate, IPD, said, “Growth in the Irish commercial property market is now looking impressive, with the levels of return starting to rival those last seen in 2006.
“However, it should be stressed that today capital values are rising from a much lower base, with equivalent yields averaging 7.3% at the end of June 2014 compared to 4% at the height of the last boom.
“At the same time market rents are now moving ahead after a long period of economic stagnation as hard-earned fiscal reforms inject confidence in the Irish economy.”
Sophie.Furber@estatesgazette.com
