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Conditions in the Irish commercial property market have weakened in recent months, primarily due to a scarcity of funding, according to the latest report from property consultants, CB Richard Ellis. According to the May Bi-Monthly report there has been a marked decline in transactions in the investment and development sectors in Ireland. Land values have declined by 20% leading the consultants to readjust yields in the investment market. The hotel and pub sectors have also seen a reduction in transactions.

CBRE said that prime yields for high-street retail properties remain stable at approximately 2.75% but prime yields in other sectors have moved in by approximately 25 basis points compared to where they were in March 2008. Yields for prime office and shopping centre opportunities are now 4.25%, while prime retail warehouse yields are currently 4.75% while yields for prime industrial properties are in the order of 5.25%.

Despite the decline, CBRE said that take-up in the Dublin office market remained strong in the first quarter of 2008, with almost 45,000m² of new lettings signed in the period. The report also noted that an even healthier volume of office letting activity is anticipated during the second quarter on the back of a number of large pre-lettings, which are due to sign shortly.

Although CBRE is confident that any cyclical slowdown in property market performance will ultimately correct itself, the report also stressed that the biggest threat to the long-term sustainability of the Irish office sector is tax harmonisation, with Ireland's 12.5% corporation tax rate being the single biggest reason why international occupiers choose to locate here.