The longest-running boom in the commercial property market has finally run out of steam, according to a new study.
The Irish Property Index, published today by agents Jones Lang LaSalle, shows that overall returns in the three months to the end of June were the lowest for any quarter since 1993. The returns of 1.8 per cent compare with a growth of 3 per cent in the first three months of the year and an even more impressive 6.4 per cent in the second quarter of 2000.
The results emerged as figures from the Central Statistics Office confirmed that last year was a record one for economic growth and, analysts say, is likely to be the peak of the economic boom.
Most analysts are now predicting growth of 6-7 per cent this year as the economy cools. This compares with annual growth of 11.5 per cent in Gross Domestic Product and 10.4 per cent in Gross National Product last year.
Ms Margaret Fleming of Jones Lang LaSalle said it was hardly surprising that the commercial property market was out of breath after eight years of sustained high growth. Values are now treading water and the focus is on what will happen next.
The only real surprise is that the buoyant conditions lasted for eight years in a market that has been notoriously cyclical. The previous boom ran for only three years up to 1990.
During some of the peak years, when annual returns hovered between 24 and 39 per cent, private individuals and business syndicates were investing more than pension funds and insurance companies in commercial property.
Most of these individuals have built up multimillion-pound portfolios which include not only small investments but large-scale properties such as shopping centres and office blocks which were once the preserve of institutions.
The slowdown has been anticipated by pension funds and insurance companies, which have been inundated with offers of investment opportunities over the past six months.
The present attempts to offload commercial property coincides with the introduction of tighter lending criteria by the banks. Development sites and suburban office development are the first to be hit under the lending cutbacks.
Last month only one developer (along with Dublin Corporation) tendered for Clancy Barracks at Islandbridge in Dublin and the 13-acre complex is still for sale.