There has been a near 100% collapse in activity in the commercial property market since the peak in 2006 and the government needs to get off the fence regarding upward-only rent and make a decision, according to Savills Ireland.
The property consultants said that the government needs to end the current uncertainty regarding rent review legislation and clarify one way or the other as to its plans on the potential changes.
Savills say this will allow investors looking at the Irish market to actually complete deals.
“We have seen a 100% drop in market activity since the peak of market in 2006 when over €3 billion worth of commercial property transactions were completed. This figure compares to €270 million of turnover in 2010, but only €10 million this year, with the drop between 2010 and 2011 largely a result of the rent review issue,” said Joan Henry, Director of Research at Savills Ireland.
The property experts say that the uncertainty that the proposed legislation on rent reviews has brought this year has resulted in the stagnation of the investment market.
“Clarity on this issue is urgently needed as on-going uncertainty has destroyed market activity to date in 2011 and has made it impossible for investors to make decisions to complete transactions. We are seeing clear evidence of demand from investors for prime opportunities in the Irish market, however a lack of supply coupled with uncertainty over the rent review legislation are acting as a drag on actual activity. We expect that clarity on the issue would enable NAMA, receivers and banks to bring properties to the market, bringing a much needed increase in supply and therefore allowing more normal market activity to resume again.”
Savills say commercial property values have fallen by an estimated 65% from peak to estimated current values.
“Clarity on the rent review legislation would allow transactions to complete – which would in turn provide evidence as to where prices actually are – which is critical for NAMA and other key holders of stock,” said Ms Henry.