'Stalled' Irish real estate market set to recover in 2012, says CBRE

IRELAND - Prime assets within Ireland's "stalled" property market will recover in 2012, CBRE has predicted, although the consultancy doubted that secondary assets would be able to replicate the growth as many tenants sought to negotiate leases.

Outlining the situation facing the country's commercial real estate market, CBRE Ireland's executive director Marie Hunt said the government's proposed upward-only rent review ban had acted as a "major impediment" to transactions last year.

"Although the occupier sectors held up well last year, the investment sector of the Irish commercial property market was stalled by uncertainty in 2011," Hunt said in the company's monthly viewpoint.

She further estimated that market prices would stabilise over the course of the year, allowing for a "small" positive total return for the first time since 2008.

Despite this, Hunt predicted secondary properties would not see the same positive growth as some of the country's prime assets.

"With the market for secondary properties limited to a small pool of domestic cash buyers and economic conditions still proving challenging, it is inevitable yields for non-prime properties will continue to soften despite values for prime properties strengthening somewhat," she said.

Hunt added that tenants would also take advantage of lease break clauses to seek other accommodation or renegotiate rents, leading to a "continued polarisation" of prime and secondary office prices due to the wealth of the secondary property.

CBRE said that, with the last few months of 2011 seeing a number of prime assets going under offer, pricing levels were gradually being established, allowing for a strengthened market for the sale of prime assets this year.

"There will be an increase in the number of investment properties being offered for sale over the course of 2012, as banks, receivers and NAMA implement disposal strategies," Hunt said.

"The bulk of demand for prime investment properties will emanate from overseas investors, whereas domestic investors will be the dominant purchasers of smaller investment properties and provincial assets."

In October last year, IPD reported the 15th consecutive drop in Irish property values, noting that there had not been any transactions in two quarters.