PARTNER PROFILE CBRE
ONWARDS NOT UPWARDS Seeking professional advice concerning the Irish commercial rental market is the best way forward, according to CBRE’s Enda MacMahon and Dervla Gunne.
O
ver the last number of years, there has been much discussion about rents in the Irish commercial property market, with considerable focus on the extent to which rental values in many sectors of the market decreased following the global financial crisis. Indeed, in some sectors, prime headline quoting rents fell by more than 50 per cent from peak to trough. Several occupiers didn’t benefit from this decline, however, on the basis that many of them had committed to leases prior to the downturn, which in most cases contained upward only rent reviews, as had been the norm prior to 2010 when new legislation was passed in Ireland effectively banning such clauses in leases from that date forward. All leases signed since 2010 now contain ‘upward or downward’ rent review provisions or some variant of this. Considering how depressed the Irish commercial real estate market was following the unanticipated and unprecedented decline experienced after 2008, it is no surprise that very few rent reviews materialised over recent years. However, given the extent to which rental and capital values have appreciated in the Irish commercial real estate market over the last 18-month period in particular, this situation is
likely to change. We expect to see a considerable increase in the number of rent reviews being activated over the next few years and on the basis that many of these will be quite complex, we expect that negotiations will prove contentious in many cases. As this area is quite specialist, we believe that the demand for professional advice will increase considerably over the next few years and that there will be strong demand for the services of specialist rent review experts.
LEASE STRUCTURES As rent reviews begin to be activated over the next few years, it remains to be seen what effect the new ‘market rent’ rent review lease structure will have. It also remains to be seen as to what adjustments will have to be made to historic ‘upwards only leases’ in order to accurately compare them with new ‘market rent’ leases. The new lease structure provides a tenant with the comfort that the rent being paid throughout the life of the lease will be at (or close to) market rent. The rent review cycle is generally every five years; as the market changes during a five-year period, the lease rent will be aligned to the market level at the expiry of each five-year cycle. In contrast, as a
Enda MacMahon, Director, Professional Services, CBRE
Dervla Gunne, Director, Professional Services, CBRE
We expect to see a considerable increase in the number of rent reviews being activated over the next few years and on the basis that many of these will be quite complex, we expect that negotiations will prove contentious in many cases.
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InBUSINESS | Q2 2015
29/06/2015 15:44