Published on Citywire, 7 November 2007

Irish property returns appear to be de-coupling from the UK after a month when the Emerald Isle delivered accelerating growth.

Irish commercial property returns accelerated to 3.3% between July and September as UK returns from the sector fell to their lowest level for 15 years.

Commercial property returns in the republic rose from 3% in the second quarter of 2007, taking 12-month growth to 15.2%, while UK returns fell to -1.2% in September.

The figures, compiled by the Investment Property Database, were made up of 2.4% capital growth and 1.4% rental, and took the 12-month Irish result to 15.2%.

Irish property has historically been closely aligned with the UK, said IPD research manager Angela Sheahan, but appeared to have diverged as the British market fell. ‘There is a potentially similar situation, property prices are arguably overpriced, but the fact that is a much smaller market means that there is not so much supply,’ said Sheahan.

‘Fallout from the UK market would be the only reason for a slowdown, but I wouldn’t be surprised if they continued to be robust.’

Offices offered the best returns over the quarter with a total of 4.2% on investment. Industrials offered 2.7% followed by retail on 2.6%.

Sheahan said that industrials would be the one to watch during 2008, as lucrative residential warehouse conversions reduced the supply of property.

Most of the growth was driven by domestic demand, she added, with the small scale of the market meaning international institutional investors had little access.