IRELAND – Commercial property in Ireland has risen in value for the first time in six years, according to third-quarter figures, bucking the falling trend that has seen 65% wiped off values since the recession.

The IPD/SCSI (Society of Chartered Surveyors Ireland) Ireland quarterly property index showed values for commercial property in the country increase by 0.3% in the third quarter of this year.

The data also showed real estate in the sector produced a total return of 2.6% in the quarter, which was the highest quarterly total return since September 2007.

Phil Tily, executive director and head of UK and Ireland at index provider IPD, said: “Growth is creeping back to Ireland’s property market after six very difficult years, but they are six years that have also seen an enormous effort on the part of the government and the property industry to reinstate confidence in the market.”

Government measures such as cutting stamp duty, getting rid of rent review legislation, keeping corporation tax stable and successfully implementing austerity measures are now starting to pay off, he said.

But within the commercial property sector, there are differences in the rate at which different sub-sectors are recovering, the data showed.

Total returns for offices were 3.2% during the third quarter, driven by rising capital returns of 0.9%, according to the IPD/SCSI data for Ireland.

But returns for industrial and retail properties were lower at 2.3% and 1.7%, respectively.

Capital values continued to fall in these latter two sub-sectors, dropping 0.5% and 0.3%, respectively, the index provider said, but it noted that these figures represented a much slower rate of decline.

It said bargain-hunting private equity investors had been looking at discounted property assets in Ireland for nearly two years, and that the launch of Ireland’s first real estate investment trust (REIT) in June reinforced the positive outlook.

High income yields on Irish property have been the main reason investors are coming back to the market, the index provider said.

At 9.7% in September, annual income returns for Irish property overall were higher than those IPD measured in any other country, and were more than one-third higher than the 6% return offered on property in the UK, it said.

By sub-sector in Ireland, annual income returns were 10.2% for offices, 12.2% for industrials and 8.5% for retail units.

Colm Lauder, associate and consultant for UK and Ireland at IPD, said occupier demand was still a critical component of growth, and had driven the recovery in the office sector and improved returns for industrial units.

Overall, rental values fell by 0.4% in the quarter, which IPD said was almost entirely due to weak demand in the retail sector, which saw falls of 1.9%.

For offices, rental values rose by 0.5% and by 1% in central Dublin.

But Lauder noted neither the office nor industrial property sectors were wholly affected by weak domestic demand because they were largely driven by international corporate tenants and exports.

“Last week’s seventh austerity budget made it clear there is still a long way to go before domestic spending will significantly increase, which may have some effect on the recovery of the retail sector,” said Lauder.