EUROPE – Dublin will emerge as a target for value-added real estate investors amid "largely completed" repricing and a halt on new office supply, according to two reports published this week.

German property firm Patrizia claimed value adjustments in two of the PIIGS peripheral European economies – Portugal, Italy, Ireland, Greece and Spain – had created retail bottlenecks in markets where prime assets had effectively decoupled from the macro-economic environment.

Meanwhile, vacancy rates remained high only in obsolete assets in poor locations.

Head of research Marcus Cieleback identified Dublin office and retail markets – which will see increased core investor interest from H2 – as outliers in a trend that would take in other PIIGS property markets from 2015.

In the meantime, he suggested, investors' unreasonable price expectations meant yield shifts in PIIGS capital markets had failed to filter through to commercial real estate markets as a result not of fundamental trends but "subjective and emotional factors".

IPD Q1 data published this week indicate recent growth in Irish office and industrial rental values after five years of falling rents – the first sign, said the firm, of recovery in the occupier market.

Income returns have proved resilient over the five years, at 10%, but Q1 also saw modest capital growth.

Meanwhile, a note from CBRE claimed returns for prime commercial real estate in recovering European markets would outperform so-called safe havens over the next five years, with at least 9% compared with 3-8%.

Head of research Neil Blake said investors would "come off the fence" this year to invest in Dublin.

Although Madrid and Milan have yet to undergo significant repricing or recovery, they will likely be next.

But he said the appetite for recovering markets depended on the recovery of weaker euro-zone markets and would in any case be limited to non-core investors.

Moreover, the trend would not "significantly affect liquid, safe-haven markets such as London, Frankfurt or Paris, whose stable fundamentals are central to the investment criteria for many income-driven investors", said Blake in a statement.

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