RetailInvestments: A price of €4.25 million has just been agreed for a retail building on Exchequer Street, Dublin 2 - this price shows a record low initial yield of less than 1.5 per cent, writes Jack Fagan

Prime retail investment yields are continuing to fall in Dublin city centre because of the weight of money chasing the few investment opportunities available. Hamilton Osborne King has just agreed sale terms at €4.25 million for number 33 Exchequer Street, a self-contained, four-storey over basement retail building which had been expected to sell for €2.75 million.

The initial yield will be less than 1.5 per cent - the lowest for a retail property in the city, though this should rise to at least 2.5 per cent when the rent is reviewed next October. Even at that level of return, it will still be below the 3.25 per cent available on deposits with Northern Rock.

The redbrick Exchequer Street building is let to Rio Coffee Company on a 35-year full repairing and insuring lease from 1991, leaving an unexpired term of 20 years. The current rent for the 233sq m (2,508sq ft) building is €66,000, a considerable way behind the going rate in the area.

Cormac Dunne of Hamilton Osborne King said that between 15 and 20 private investors were continuously chasing investment properties like the one on Exchequer Street. They were apparently prepared to settle for low initial yields provided the buildings were close to Grafton Street and were well let.

The high level of interest is due in part to the fact that Exchequer Street, like some of the other secondary streets in the area, has bounced back in recent years because of the revival taking place on South Great George's Street and the increasing tendency of traders to move from the high rents of Grafton Street to cheaper premises nearby. The opening of trendy new bars and restaurants has also helped to speed up the renaissance. Last October, a private investor settled for a yield of 1.65 per cent when he paid €4.9 million for a modest four-storey over basement commercial building at 53 Dawson Street. The premises were sold through a Lisney auction.

Ann Hargaden of the same agency may well set a new benchmark yield early next month when she sells the O'Connor Jeans retail building at 23 Grafton Street.

At a guide price of €15 million, it would show a yield of 1.5 per cent but, like Exchequer Street, the rent of €241,250 is expected to rise sharply when it is reviewed next October.