The pace of the fall off in rental income from the commercial property market continued to slow down in 2011 when headline rents declined by 5.79%
This is the main finding in the latest Rental Indices compiled by estate agent Lisney, which had already reported that rents fell by 17.62% in 2010 and by 27.61% in 2009.
Looking back to the peak of the property market in the second half of 2007, Lisney said the improvement in Ireland’s cost competitiveness was clearly visible in commercial rents. Since then, the composite index had declined by 49.91%. In the final quarter of last year, headline rents had fallen by 3.19%, driven by further falls in high street retail and industrial rents.
Though consumer confidence in the retail sector remained weak last year, there was an increase in letting activity. Several overseas fashion retailers entered the Irish market, while others continued to expand in prime areas where attractive terms were on offer.
Rents continued to decline, falling by 5.58% in the 12 months and by 4.76% in the final quarter. The overall slippage in the composite retail index since 2007 has been 46.89%.
Rents on Grafton Street and Henry Street fell in the last three months of last year by 6.54% and 6.25% following some stabilisation in the earlier part of the year
The Grafton Street index is down 10.71% in 2011 and by 54.55% from the peak of the market, while the Henry Street index is back by 6.25% last year and by 42.31% since 2007.
The Lisney report showed that shopping centres along Dublin’s M50 continue to be the best performing retail sector since the onset of the downturn, with the index back by 28.86%.
Turning to the office sector, the report said that with 164,000sq m (1,765,280sq ft) of space let last year, the market did better than expected. Most of the letting activity (54.4%) took place in the city centre, with companies in the information technology and related industries representing the bulk of new occupiers.
The agency estimates that about 20% of the 3,540,000 sq m (38,104,240sq ft) of completed space in the Dublin area is now vacant.
The index reports that rents in Dublin have fallen by 54.88% since the peak. However, the pace of decline slowed to 4.29% in 2011, following annual declines of 17.43% in 2010 and 35.13% in 2009.
In the final quarter of 2011, the overall index remained static for the second consecutive quarter, suggesting that the bottom of the cycle may now be reached, Lisney said.
Article originally published in The Irish Times.