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News Release

Dublin

The drop in capital values arising out of yield shifts starts to moderate

The Q1 09 -10.6% reduction in capital values is less severe than movements in last two quarters.


Overall Returns for the Jones Lang LaSalle Irish property Index were -8.9% in Q1 2009 and -40.5% in the year to the end of March according to the latest Irish Property Index by Jones Lang LaSalle.  “As the economic downturn continues the ongoing performance of commercial property in Ireland during 2009 continues to be affected, with a new wave of impact from rental values” commented Dr Clare Eriksson, Head of Research at Jones Lang LaSalle in Dublin.  The performance of investment portfolios is dependent on the protection and creation of income, which is a challenge at present.

Capital values in the Index fell by -10.6% in Q1 2009 and by -43.9% in the year to March.  The Q1 09 -10.6% reduction in capital values is less severe than movements in the last two quarters of 2008 and indicates that the drop in capital values arising out of yield shifts is starting to moderate.  Of the three commercial property sectors retail capital values were the least affected in Q1 2009 (drop of -9.9%) but had the steepest yearly capital value decline in the year to March 2009 of -48.4%.  In the quarter capital values for Irish offices dropped by -10.7% and by -41.5% in the year to March.  Capital values of industrial property decreased by -35.9% in the year to March and by -12.5% in Q1 2009.

Rental values within the Index came under pressure in Q1 2009 and accordingly fell by -2.8% in the quarter and by -4.4% in the year to March.  In Q1 2009 the office rental Index had a quarterly and annual drop of -3.2% and -2.7% respectively.  Retail properties recorded a rental change of -1.9% in Q1 2009 but had a more substantial rental decline of -7.0% in the year to March 2007.  The industrial sector had a drop in rental values of -4.3% in the 12 months to March 2009.

Income in the Index portfolio fell by -0.3% in Q1 2009 as a direct result of tenants coming under financial distress and resulting business failure.