After six years in the doldrums commercial development projects in the Republic of Ireland are once again starting to accelerate.
Fifty-five commercial land sales — worth almost €155m (£130m) — were completed in the first nine months of this year, the first time that number has been reached since 2007. The value of office, retail and industrial premises also rose by 0.3 per cent during the three months to September.
It is, according to real estate advisors CB Richard Ellis, the “best evidence yet of a recovery in Ireland’s commercial development land market” after the nation suffered the worst property crash in Western Europe.
Marie Hunt is head of research at CBRE and author of a recent market study which claimed significantly more land would have changed hands were it not for restrictive conditions on new projects. One major hurdle is the 80 per cent windfall tax on re-zoning which limits the amount of development land being transacted.
“There is,” she says, “a particular scarcity of large land banks being released for sale. Demand for sites is being primarily fuelled by the imbalance between supply and demand in the Dublin housing market and signs of rental growth in the Dublin office sector.”
Annual inflation for Dublin office space is expected to reach 14 per cent next year, with Irish house prices already hitting double digits. “Against this backdrop, demand for sites with planning permission has heated up significantly,” adds Ms Hunt.
Not surprisingly the capital returned the highest value deals of the current upturn. A prime quarter acre site in Percy Place, Dublin 4, changed hands this summer for €2.4m (£1.67m) — a rate of nearly €10m or more than £8m to the acre.
Other significant sales included:
“Growth is creeping back to Ireland’s property market after six very difficult years,” said Phil Tily, an executive director at Investment Property Databank (IPD). “The rewards of lowering stamp duty, the ridding of rent review legislation, maintaining corporation tax levels and successfully implementing austerity measures are now starting to pay off.”
There is a word of caution. Developers are warning that despite the apparent increase in sales, land prices and rents are still not high enough to sustain the majority of new housing and office projects with both these types of development taking at least a year from planning to completion.
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