Irish Market Review

The Irish property market continues to perform strongly across all sectors with the Society of Chartered Surveyors / Investment Property Databank (SCS/IPD) Index producing a total return of 5.2 per cent for the six month period ending June 2007. The retail sector has been the star performer over the past 10 years and continued to experience strong performance in the first six months of 2007. The SCS/IPD retail recorded a return of 4.7 per cent for the six months to the end of June 2007. The lack of city centre opportunities is directing demand to suburban centres. Take-up in new shopping centres countrywide is strong with anchor tenants including Tesco, Marks & Spencer, TK Maxx and Dunnes Stores continually seeking opportunities. Prime retail yields are currently 2.5 per cent - 3 per cent.

The office market also continues to perform well with strong demand for new accommodation particularly in the Central Business District and the Dublin Dockland areas. There are a number of active enquiries for accommodation in excess of 10,000 sq m mainly from the professional and large financial institutional sectors. Occupiers are seeking
landmark headquarter buildings with significant design merit.

The first six months of 2007 has seen office reservations of approximately 160,000 sq m, twice the level achieved last year. The current vacancy rate for the Dublin Office Market is approximately 10 per cent overall with 7 per cent vacancy in the city centre. A return of 5.7 per cent was recorded in the first six months of 2007 on the SCS/IPD Index. Average prime office yields are 3.75 per cent - 4.25 per cent and a strong rental growth is now showing through. Prime rents are approximately €600 per sq m net of incentives.

Generally, the industrial market has continued to strengthen also during the first six months of 2007 recording a total return of 5.6 per cent for the six months to end of 2007 in SCS/IPD Index. Expansion work continues on the M50 motorway and the Port Tunnel has now opened. Both of these facilities will benefit property on the M50 and M1 corridors.

On the residential front, recent uncertainty brought about by government promised changes in stamp duty levels coupled with interest rate increases have caused some weakness in the market with values down on average by 3 per cent during the first 7 months of the year. The subsequent post budget changes in stamp duty rates should improve the position for first time buyers. Meanwhile growth is also being seen in residential rents with investors
returning to this market.

Despite recent interest rate increases the general view is that the Irish property market will continue to perform strongly supported by positive economic conditions and continued economic growth.

It is expected that the residential sector remains weak in the short-term though the fundamental drivers underpinning the market will ensure that value growth resumes albeit possibly at more modest levels than experienced over recent years.

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