The value of income-producing office buildings in central Dublin rose for the first time in six years as businesses sought additional space for expansion.
Downtown office values rose 0.3 percent in the first quarter from the previous three months, Investment Property Databank Ltd. said in a statement today. The average value of the properties in Dublin’s docklands district rose 2.2 percent, the London-based research company said.
“Though restricted to prime areas of the market, these are the first signs of headline-level growth in Ireland,” Managing Director Phil Tily said in the statement. It “cannot be anything but welcome news for a market that has suffered the deepest property downturn on record.”
U.S. companies including Facebook Inc. (FB), the world’s largest search engine Google Inc. (GOOG) and securities firm Susquehanna International Group LLP have expanded in Dublin or plan to lease additional space, causing a shortage of modern office space and boosting rents. Income returns from Irish commercial real estate are more than 10 percent a year, the highest among the countries that IPD covers in its research.
“Good tenant demand, combined with no new construction, has resulted in a looming shortage of prime office space,” Society of Chartered Surveyors President Roland O’Connell said in the statement. “Demand from investors is not limited solely to prime income-producing buildings, but also to older, well located buildings which could be refurbished to modern standards.”
Across Ireland, total return for income-producing buildings, which combines changes in property values and rental income, was 1.3 percent in the quarter. Capital values for stores, offices and warehouses fell 1 percent.
The average rents for offices rose 0.2 percent and those for warehouses increased 1.6 percent in the first quarter, the first increase in five years, IPD said. Rents had fallen by an average of more than 48 percent since December 2008, the firm said. The value of office buildings was largely unchanged during the first quarter of this year.
The value of stores and malls fell 2.3 percent in the first quarter of the year as consumer confidence remained weak, IPD said.