Ireland's commercial property sector has deteriorated drastically in recent months against a backdrop of weakening economic indicators and financial market turmoil, according to a new report from CB Richard Ellis. The lack of bank funding is having a very significant impact on levels of transactional activity in the development and investment sectors. Indeed, only EUR 465mln of investment transactions were concluded in the Irish market in the first nine months of 2008, reflecting a 70.1% drop on last year's figure of EUR 1.6bn.
Ireland's commercial property sector has deteriorated drastically in recent months against a backdrop of weakening economic indicators and financial market turmoil, according to a new report from CB Richard Ellis. The lack of bank funding is having a very significant impact on levels of transactional activity in the development and investment sectors. Indeed, only EUR 465mln of investment transactions were concluded in the Irish market in the first nine months of 2008, reflecting a 70.1% drop on last year's figure of EUR 1.6bn.
Irish investors have been conducting very few transactions in the UK and are likely to invest no more than EUR 1bn in the country this year, which equates to less than one fifth of the total spent in the UK by Irish investors in 2007. Transactions are also thin in the hotel and licensed property sectors, again primarily due to funding issues. CB Richard Ellis expect that only 10 pub properties will change hands in Dublin in 2008 compared to 19 in the same period in 2007.
CB Richard Ellis is urging the government to reduce the rate of stamp duty on commercial property which they believe will encourage some non-domestic buyers to consider purchasing property assets here.
Marie Hunt, director of Research at CBRE, said: 'Sovereign wealth funds and international investors continue to seek out investment properties across Europe. However, despite the price correction that has occurred in the Irish market since the beginning of the year, the exorbitant 9% rate of stamp duty prevailing here is likely to prove a considerable barrier to such investors. This issue urgently needs to be addressed by government in the forthcoming Budget.´
Transactional activity is continuing in some areas of the property market with some occupiers finding it an opportune time to be concluding lease negotiations. The property consultants said that some landlords have started to accept slightly lower headline quoting rents in addition to inducements such as rent-free periods and break options to secure lettings in their schemes. However, many occupiers are postponing expansion or re-location decisions until such time as economic conditions improve.
