LONDON, March 1 (Reuters) - Rents for the best Dublin offices have risen for the first time since the financial crisis caused a property crash in Ireland that cut some commercial real estate values by more than half, the latest data from property consulant CBRE shows.
Calculated every two months and based on recent transaction data, rents have increased to 28.50 euros ($37.40) per square foot from 27.50 in January, driven by demand from tenants like Facebook, Ebay and Google that are attracted to the country’s low corporation tax rate of 12.5 percent.
At the same time yields on so-called prime offices have fallen to 6.5 percent, the lowest since they were 5.5 percent before the collapse of Lehman Brothers in the third quarter of 2008, as overseas investors competed for the best real estate in a bet that the country has put the worst of its economic problems behind it.
At the last peak of the market in the middle of 2007 prime office rents were 62.50 euros per square foot before falling to 27.50 euros last year and yields were 3.75 percent before hitting a peak of 7.5 percent in 2008, CBRE said.
“It is a top slither of the market but it’s another indicator showing economic improvement in Ireland,” said Marie Hunt an executive director at CBRE in Ireland. “Office rents should hit 30 euros per square foot by the middle of this year.”
Ebay said this month it would hire 450 people in Ireland almost a year after handing the bailed-out country its biggest post-crisis job boost by hiring 1,000 new workers at its payment service PayPal.
Overseas investor interest has come from North American investors and RREEF, the property arm of Deutsche Bank , JP Morgan Asset Management and the real estate arm of French insurer Axa all told Reuters they have looked at buying in Ireland.
Overseas interest is also picking up as the country’s banks, including the National Asset Management Agency ‘bad bank’ ramp up loan sales backed by real estate.
European Commission president Jose Manuel Barroso said on Thursday that tough fiscal decisions meant Ireland was “turning the corner” though patchy economic data that includes falling retail sales points to a slow and uneven recovery.
Outside the best Dublin locations, office rents are flat-lining amid a vacancy rate of about 20 percent, a trend mirrored in the country’s housing market. House prices fell 0.6 percent month-on-month across Ireland in January though they rose 0.5 in Dublin.