Commercial real estate market may finally have bottom out

Commercial real estate market may finally have bottom out

The commercial real estate market may finally be bottoming out after the Jones Lang LaSalle Q4 Irish Property Index showed that values rose by 1.2% in the final quarter of 2011.

This is the first time values have risen since the third quarter of 2007 with Jones Lang LaSalle attributing the marginal recovery to the 4% reduction in stamp duty in December’s Budget.

Had this not occurred, the underlying fall during the final quarter would have been minus 2.6%. Overall in 2011, capital values fell by 10.1%.

Hannah Dwyer, research analyst with Jones Land LaSalle, said that while the increase in capital values appears positive, the fact that overall they had fallen by 63.8 per cent since they peaked in the third quarter of 2007 could still not be ignored.

“Plus, with remaining economic uncertainty across Europe, it would be naive at this stage to assume this shows the market has started recovering. There are, however, signs of some stabilisation in the pace of fall, with a lot of bad news already priced in.”

She said another important factor was the Government’s clarification that it would not be proceeding with legislation to retrospectively ban upwards-only rent reviews in existing leases.

The modest improvement in the JLL Index is positive and follows the recent CBRE prediction that the Irish CRE market will stabilise over 2012 and ‘begin to emerge from the most significant correction it has ever experienced’ and the latest Rental Indices compiled by Lisney, which suggest that the bottom of the cycle may now be reached.

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