Sunday, October 13, 2013

13/10/2013: Yields, Prices and Damn Splits in Office Property Markets...

Few days back I highlighted the CBRE Q3 2013 research on Irish office and retail property markets. Here's food for thought in a related spectrum. Is Dublin office space still overpriced?

The above is taken from Q3 report on European markets from Cornerstone. Here's what they have to say on this: "On the supply side, local vacancy rates vary considerably – from around 5% in Paris CBD and central London to in excess of 20% in Dublin and Athens. Where vacancy levels are lowest, the recovery in average rents will tend to be faster. However, the lack of new development in recent years means that shortages of Grade A accommodation already exists in an increasing proportion of markets. The probability of rental growth, particularly on a net effective basis, at the top prime end is thus

Which suggests the markets in the likes of Dublin and Athens are bifurcating - demand for quality outstripping supply of quality and this means aggregate yields (inverse of prices) are not reflective of underlying market dynamics. Instead - new properties are finding buyers and seeing appreciation, older / existent properties are setting into stagnation before the onset of continued decline (as/when supply of new properties improves). It might be fine to think of the property prices as rising, unless you own the properties that are not fitting the rising demand for quality... God forbid, with leverage on top of ownership...

1 comment:

Joe R said...

Building types available, type of demand ( small big / offices / open plan or cellular / high technology ) and urban transport infrastructure have a strong part to plan in these figures. Most large corporations want open plan offices and car parking and/or metro connections, all of which together are difficult to provide in older, well established cities with historically protected city centers. Degrees of protection may vary. Even definitions of city centers and CBDs.

I would be curious also to know if vacancy is based on pure market vacancy or includes obsolete buildings.

I think to get any `true´ data from these figures you would need a very complex analysis of many factors. As presented here it is more like comparing apples and oranges.