Total returns in Irish commercial property picked up in the third quarter to 3.3% quarter-on-quarter compared to 3% in the second quarter according to the SCS/IPD quarterly index 2007.The index also found that offices regained their crown as the best performing sector in Q3, with a total return of 4.2% compared to 2.7% in industrial and 2.6% in retail.
Total returns in Irish commercial property picked up in the third quarter to 3.3% quarter-on-quarter compared to 3% in the second quarter according to the SCS/IPD quarterly index 2007.The index also found that offices regained their crown as the best performing sector in Q3, with a total return of 4.2% compared to 2.7% in industrial and 2.6% in retail.
Total returns for the year to September 2007 stands at 15.2%, made up of 10.9% growth in capital values and a 4.0% income return. The report also noted that the 3.3% total return seen in property in Q3 2007 significantly outperformed the -14.9% return seen in equities and marginally beat the 2.7% return seen in bonds. According to the report, the strong capital growth of 2.4% in the quarter was made up of 1.4% rental growth and falling yields which added 1.2% to capital values.
The out performance of offices, the report said, was down to a combination of robust rental appreciation and investor sentiment pushing yields downward. Office rents grew by 1.6% in Q3 and equivalent yields fell by 7 basis points adding 1.6% to capital values. Contrarily, the strong return in retail was down to strong rental growth and the return in industrial was down to yield movements, while rents remained static.
Commenting on the findings, IPD research manager Angela Sheahan said: 'Quarter three shows further strong returns in Irish commercial property. While rental values continue to grow, investor sentiment continues to drive yields down.'
