European commercial real estate investment turnover reached €23.5bn in the second quarter (Q2) of 2010, a 15% increase on the €20.3bn transacted in the first three months of 2010, according to the latest data from CB Richard Ellis (CBRE). Investment turnover rose despite the stress factors emerging in the broader capital markets, such as the sovereign debt crisis and the introduction of austerity measures by many European governments.

Investors continue to predominantly focus on the core assets, predominantly at the prime end of the market, with the largest, most liquid markets seeing the most activity. As property investors’ concerns over issues of sovereign debt grew during Q2 2010, the flight to quality seems to have intensified even further. Q2 2010 investment activity remained concentrated in the UK, Germany and France, which together accounted for 62% of the European investment total. France saw the highest growth of the three markets, with a quarter-on-quarter increase of 46%. The UK market saw an increase of 24% in investment activity in Q2 2010.

Of the 27 markets covered, some of the smaller European countries, such as Austria, Ireland and Czech Republic, reported the highest quarterly increases, albeit from a very low base. However, whilst not yet fully reflected in the level of the actual deals closed, Poland and the Nordic region - - Sweden in particular - - are starting to emerge as a focus of strong investor demand.

On Wednesday, CBRE Ireland launched its second quarter Dublin Office Market View Publication, which identifies and analyses trends in the Dublin office sector from April 2010 to June 2010. The report indicates what CBRE terms "an encouraging level of letting but the medium to longer term outlook remains uncertain."

Report Highlights

• €60m of office investments sold in Dublin during Q2 2010, while prime office yields remain stable at approximately 7.5%.
• A healthy level of office take-up achieved in Dublin in Q2 2010, bringing total take-up in the city in the first half of the year to almost 50,000m2.
• Occupiers remain extremely cost-conscious, are focused on turnkey solutions and are showing a preference for fully fitted accommodation.
• Despite the fact that there is a large amount of vacant office accommodation in the capital, with the overall vacancy rate at 23.5% as of the end of Q2, much of this comprises floors in otherwise occupied buildings as opposed to empty buildings.
• There are no new office developments to come on stream in Dublin after the end of 2010.
• 79% of current demand focussed on city centre properties.

Willie Dowling, Executive Director at CB Richard Ellis, commented “There has been an encouraging level of letting activity in the Dublin office market in recent months and we are on target to beat last year’s take-up level of 78,500m2. However, despite the fact that transactional activity in the Dublin office market has been holding up well over recent quarters and there is a good level of active requirements, the medium to longer term outlook still remains uncertain. Further consolidation in the financial services sector is a real threat while additional Government austerity measures are concerning. The three vital ingredients for a properly functioning office market - meaningful job creation, rental growth and the availability of funding - are all unlikely to materialise for some time. In the interim, the office sector will remain primarily reliant on company expansions and relocations and with little net absorption occurring, vacancy rates will remain high”.

According to the new report, Dublin office letting activity remained consistent in Q2 2010, with 24,652m2 of take-up recorded in the period, compared with 24,954m2 of lettings signed in the first three months of the year. This represents a 6% increase in take-up levels on an annual basis while recent quarterly take-up is more than double the level of quarterly letting activity achieved in the Dublin market in 2009. There were 35 individual office letting transactions signed in Q2 2010, the majority (19) of which were lettings of 450m2 or less. Only three lettings signed in the period extended to more than 1,858m2 in size. At this point, CB Richard Ellis predicts that the Dublin office market is on target to beat last year’s level of take-up of 78,500m2.

Dublin prime retail rents dropped 19.2% in Q2 2010 and at €2,467 per sqm, are down 38% over 12 months. The Irish capital is ranked 16 -- down 8th position in CB Richard Ellis's survey of 46 cities in Europe, Middle East and Africa (EMEA).

Despite prime office rents fell 4.7% to €82 per sqm in Q2, and off 37% from the 2007peak. They however, are the seventh most expensive in the EMEA.

Dublin Office Market View Q2 2010

EMEA European Investment Q2 2010

Dublin Retail Market View Q2 2010

EMEA Rents & Yields Q2 2010