The recovery in the Irish commercial property market in going from strength to strength with the overall returns – rental income and capital values – in the third quarter up to the end of September reaching 11 per cent – the highest level since the IPD/SCSI index began in 1995.

Capital values also rose at an accelerated pace over the last five quarters, as Irish and overseas funds competed for an unprecedented volume of commercial property investments. Capital growth of 9.2 per cent in Q3 was the highest on record.

Offices continued to lead the market, returning 12 per cent in the last three months alone. Values nationally in this sector have now risen by 33.2 per cent over the last year, with values for all parts of the Dublin office market rising by more than a third in the same period.

Irish retail properties have also bounced back in much the same way as offices with returns in Q3 reaching 10.3 per cent. Retail property values have now grown by 20 per cent over the last 12 months, after six years of decline. Industrial properties is still the one sector where growth remains muted, with values up by just 4.1 per cent over the last year.

The exceptionally strong growth recorded by Irish offices stemmed mainly from a strong occupier market, with rental value growth at 8.2 per cent in Q3, far higher than for the other two main property sectors. Rental growth is now well established as the driver of office returns and with the volume of vacant grade A space in Dublin’s central business district rapidly running out, the upward pressure on rents is expected to continue.

The growth in retail values, which accelerated 8.5 per cent over the last quarter, remained very dependent on strengthening investor demand.

Retail market rental values did pick up slightly in Q3, rising by 1 per cent – the first time this has happened in 23 quarters. IPD attributes this recovery to a pick up in retail consumption.