Exceptional growth will continue in the Irish market - this is how Jones Lang LaSalle sees the office, retail and industrial market in its European Property Investment report. It states that the continued favourable environment of falling interest rates, and generally low supply and strong demand for investment property has resulted in an exceptionally strong performance in all sectors of the Irish property market in 1998 with overall returns reaching an annual high of 39.2 per cent.

High levels of business confidence, job creation and inward investment "have all combined to create strong demand for commercial properties, both for investment and owner occupation", while recently introduced tax write-off restrictions have resulted in many traditional residential investors "stepping over into the commercial market".

Yields have "hardened considerably", and along with rising rental levels, this has resulted in "spectacular increases in capital values". Prime office yields have fallen to between 5 per cent and 5.75 per cent, while prime retail property is between 4.5 per cent and 3.75 per cent. Prime industrial yields are between 7 and 7.5 per cent.

Overall, the Jones Lang Wootton Index 1998 shows total return of over 39 per cent. Capital values rose by 32 per cent across the board, with a 35 per cent increase in offices. Rental values rose by over 14 per cent, with offices rising by 17 per cent.

Office take-up reached a record 200,000 sq m and the vacancy level fell to around 2.7 per cent. Prime office rents are now in excess of £247 per sq mt with prestige lettings at up to £296 per sq m. Occupier demand is strongest in city centre locations.

The report says the short-term outlook for offices is "still strong" but in the medium to long term, the market "should experience more equilibrium between supply and demand".

The high street retail market is "governed by a shortage of supply on all sides" even though large sums of key money are on offer. As a result, prime retail units are not becoming available. Zone A rents are over £2,150 per sq m and rents being achieved in new shopping centres are in excess of £1,290 per sq m.

Land prices of £1 million per hectare are established for industrial land with motorway access around Dublin. Industrial rents are rising, with prime levels of £75 to £80 per sq m.

Europe-wide, the report states that the euro is "undoubtedly facilitating cross-border flows of investment" as investors diversify their portfolios and chase local growth spots, particularly in Spain, Italy and Portugal.

It also notes that Europe's property markets are generally in upswing, with rental growth and hardening yields recorded in many markets as investor confidence grows. Medium-term prospects "appear stable". However, different legal codes and cultural factors mean a "pan-European market for commercial property investment is yet to arrive".