CBRE sees no recovery in the Irish market until 2010

CB Richard Ellis expects 2009 to be a very challenging for the Irish property market. In its annual Outlook report on the Irish market, the international broker is negative about 2009 prospects for the industry, and says it will likely be 2010 before conditions in the Irish property market improve.

The Irish investment market was one that was very severely impacted in 2008, with less than EUR 500 mln invested domestically, a drop of 74% compared to 2007 (EUR 1.9 bn). Although it is hoped that liquidity will improve over the coming months, CBRE nonetheless expects conditions in the Irish investment market to remain challenging in 2009. With many investors and developers under financial pressure, there may be an increase in distressed sales this year although CBRE acknowledges that it is impossible to say if this will result in prime investment properties being offered for sale.

According to Marie Hunt, director of Research at CB Richard Ellis, 'Investors remain cautious and will be unwilling to purchase properties until such time as they believe that values have bottomed out. In the interim, capital values will remain under pressure.'

CBRE expects a total of between EUR 500 - 750 mln will be transacted in the country next year. 'In the absence of transactional evidence, it is difficult for many vendors to accept the degree to which commercial property values have deteriorated from their peak. However, vendors will have to be very realistic on pricing to secure sales in the current environment,' Hunt says.

The UK investment market was the first property market in Europe to see a significant fall off in values and is therefore likely to be the first to stabilise, albeit values are likely to overshoot before stabilising as in all other cycles. According to the new report, the development land sector fared worst in the downturn that characterised the commercial property market in Ireland in 2008. CB Richard Ellis says that there is little transactional evidence to quantify the extent of the fall in land values. However, it believes that on average, the value of prime development sites in Dublin fell by at least 40% during 2008, while much more dramatic declines were witnessed in secondary sites and provincial land banks. Considering the underlying economic situation, CBRE also expects the appetite for development land to remain extremely weak in 2009.