|Activity levels rise on positive returns|
|The Irish Times - Wednesday, May 5, 2010|
by JACK FAGAN
|Two reports show the market produced modest positive returns in Q1 while agents are reporting success in shifting bank branches|
WITH A second index yesterday confirming that the Irish commercial property market is again showing positive results, there has been a surprising pick-up in sales of vacant retail outlets owned by First Active and ACC Bank.
Most of the buildings have been bought either by investors or owner-occupiers.
A week after the London-based researcher IPD reported that the market had delivered its first positive return for more than two years with growth of 0.4 per cent, the Irish Property Index produced by Jones Lang LaSalle has measured growth during the first three months of 2010 at a more modest 0.1 per cent. It said that the progressive change in trend “may be a tentative first indicator of a recovery”.
JLL calculated that the fall in capital values in Q1 was the lowest quarterly decline in over two years and “is much improved on some of the quarterly movements during the last few years”. The pace of decline is slowing and is moving steadily back to a period of positive growth.
The study says this illustrates some stabilisation of capital values and indicates that most outward yield adjustments may have taken place in the prime sector of the market.
The marginal improvement in market sentiment, while welcome, is unlikely to lead to anything like a significant recovery in the immediate future because of the long-term effects of the collapse in values since the end of 2007, the ongoing banking crisis and high vacancy rate, particularly in the office and retail sectors as the economy continues to falter.
Many development sites and investments bought in recent years are destined for Nama.
In spite of the difficult trading conditions in the Irish market, agent DTZ Sherry FitzGerald has found buyers for all but four of the 28 freehold branches operated by First Active throughout the country. In 11 cases, the sales have been completed while 13 more are in the hands of solicitors. The four remaining buildings still for sale are: O’Connell Street in Limerick; Crowe Street in Dundalk; and two mixed-use tenure properties in Castlebar and Phibsboro in Dublin.
Katie Horridge of DTZ says there has been “extremely strong bidding” for most of the freehold properties because of their prime retail locations and realistic quoting prices. In most cases, those bidding had been asked to make formal offers in order to achieve the best prices. Most properties made between €380,000 and €1 million.
One of the highest prices – €1.4 million – was secured for the First Active branch at High Street, Kilkenny. Part of the building is already let and producing a rental income of €43,000. The spacious ground floor and some upper levels are still vacant.
First Active is also believed to have secured over €1 million for the branch at Upper George’s Street in Dún Laoghaire, a three-storey over basement corner building with a floor area of 390sq m (4,198sq ft). Two upper floors are already let and there should be no difficulty in finding a tenant for the ground floor area of 163sq m (1,763sq ft).
An investor paid around €640,000 for the First Active branch at North Main Street in Wexford – a long way ahead of the guide price of €455,000. The two-storey building has 280sq m (1,944sq ft) and is close to both Boots and Superdrug.
A strong price of over €700,000 was also obtained for the branch at O’Connell Street in Ennis. The former First Active branch in Drogheda is also under offer at over €700,000. It is located along the newly pedestrianised West Street.
An early seller was the First Active branch at Main Street in Dundrum, Co Dublin, which is close to the Luas station. It fetched €450,000 – €100,000 over the guide price.
In Dublin 2, the branch at Upper Baggot Street made €750,000. The ground floor is let at €40,000 while three upper floors extending to 130sq m (1,408sq ft) are vacant.
DTZ had a challenging task to offload 22 leasehold properties held by First Active under a variety of lease lengths and passing rents. However, about half the leases are either assigned or are with solicitors and it is expected that the remainder will be wrapped up over the summer months.
Two of these rented premises are in the Crescent shopping centre in Limerick and Mahon Point in Cork. In both cases the shops are seriously over-rented and may be difficult to shift.
Katie Horridge says the banning of upwards-only rent reviews has led to a fall-off in interest from traders in a number of instances. However, she still expects to assign the leases because of the strong trading locations.
Meanwhile, Dublin agent HWBC has found buyers for five former ACC branches which have closed down in provincial towns. Top price of €1 million-plus was paid by the Fitzgerald Group for the premises at North Main Street in Wexford which will reopen as Jack Jones. It will be the fourth menswear outlet to be operated by the group.
HWBC also sold the former ACC branches in Longford for below the guide price of €575,000; Kilkenny (€520,000); Dungarvan (€350,000); Roscommon (over €500,000); and Tralee (below the guide price of €670,000).
Five branches are still available and may be difficult to shift unless ACC changes its tight-fisted marketing strategy.