The Irish commercial property market will face a switch in private investor preferences in 2002, according to Lambert Smith Hampton.
However, LSH is forecasting that the market will continue to perform well, in line with the Irish economy which will grow by 2.5% in 2002.
LSH said that a combination of the launch of the euro and recent budget changes could tempt Irish private investors away from the local commercial market into European markets or the Irish residential market.
But LSH believes that the currency will usher in a “new dynamic opportunity for Irish and European investors to place funds abroad in their ‘home’ currency”.
In recent years Irish fund managers have switched a considerable amount of equity assets from Irish to European shares. Some private investors have also been nibbling at European properties. With the euro eliminating any currency exchange risk and also offering greater transparency in prices, more Irish investment may opt for European property.
LSH’s report says that this represents a two-way opportunity, with Irish property also attracting European investment.
LSH investment director Sean O’Neill pointed out that, as a result of the restoration of mortgage interest relief for residential investment, “some property investors who had switched their focus to the commercial sectors or alternative property markets overseas will return to investment in the (Irish) residential sector.
“In our opinion industrial investment product offers the safest short-term bet in 2002 with good rental growth potential remaining. Prime retail category A shopping centres and retail warehousing also remain good investment options for short to medium-term growth,” O’Neill said.
With institutional investors continuing to remain cautious, but with banks willing to lend at record low levels of interest rates on sound propositions, the first half of 2002 will be dominated by the private investor.
LSH expects the current oversupply of offices in Dublin to be eroded within the next 18 to 24 months. In the meantime it expects secondary office yields to soften in the next six months, while suburban offices will remain an unattractive investment place for the foreseeable future.
EGi News 31/12/01
