We predicted this as well.

Now that is quite something!!1 year breaks are virtually unheard of in the market and if you have evidence of 1 please post it up as I for one would love to see it!
In Dublin the overall vacancy rate for offices is 14%,with the city centre at 8%,Georgian market at 9%,suburbs at 22% and the CBD district of D2/4 at 4.2%.
With the high vacancy rate in the suburbs incentives and break clauses are prevalent but not “1 year breaks”!!Breaks in yrs 5 and 11 are common with 1 yr rent payable to exit.
Rental growth is evident in both the office and retail market,just look at last wensdays IT for proof of that.In addition new headline rents were set all over Dublin in 07,e.g Sasha took 39 Mary St on a 25 yr upwards only lease @€7,500 per zone A a new headline,Tommy Hilfiger and Karen Millen both took units on Grafton St at €11-€12,000 per zone A,again new headlines and in the office market Gareth Kellehers redevelopment and subsequent letting of the former dept of justice building @75 st. stephens green resulted in a new headline rent in the city centre of €700p.s.m.None of these lettings had any incentives or break clauses!

NonBeliever, you have said it yourself. Those vacancy rates are high and they are going to get much higher for two reasons

  1. We are heading into a recession
  2. Lots more commercial property coming on line and nobody to rent it.

These new headline rents are typical of the peak of a bubble. Even that rose tinted spectacled tit Kilbred is admitting that retail has had it’s day.
You don’t need an incentive at the top of a bubble.

As for the press release from Anglo you posted earlier. I’ve already covered that. It’s not worth anything. Professional investors won’t even read such releases.

That’s a LOT of retail in there Nonbeliever !

In fairness, Mrs Proximo could justify those rents on her own !

Having said that, retail is in for some serious chop, and I venture to suggest that we are very close to saturation in terms of the Coverage of the major international chains.

My point is that we’re at the END of that line, and most of the retail rents that you (Correctly) show were funded in 2006 Business Plans - a CERTAINTY. The tap has been turned off.

P.S. Apologies for using your strapline, I’ll bow to seniority and change same at the earliest possible.

Will the upward only rent clauses on leases be a major problem for tennants in the coming years? Landlords had no difficulty hiking rents at the reviews to keep in line with the surge in market rents. Should the market rents fall as dramatically as they rose this would leave tennants paying way above market rates. Maybe not many are affected?

I am in Galway . I can get 1 year break clauses on offices with a reasonable fit if I wish . There are, of course, some holdouts .

There are swathes of them empty , some for years and years .

It may well be tighter in Dublin but no auctioneer in Galway will say boo to a 1 year break nowadays if they want the business. 7 or 8 years ago they told ya to feck off and stuck you with a 10 year break if they were being nice , otherwise 25 years no break clause.

I can ever get these semi fits or good fits at E12 a sq ft for 10k sq ft and loads of parking, less than 1999 prices. E15 a sq ft for 2000 sq ft units .

Not that tight in Galway . Very oversupplied and with Oranmore and Claregalway creating further problems in the warehouse space . No more offices in the middle its all retail nowadays.

Ah but thats Zone A stuff , I have no knowledge of Zone A ( Galway or Dublin) which is a specialised niche market and where supply is indeed very limited and not growing . I would concede that the level of consumer spending at present, together with the foreseeable lack of new supply , does not foretell a reduction on Zone A rates and tight break terms for the foreseeable ( 1-2 years) future .

I would ask you all the same nonbeliever, whats the chances of another New Look suddenly appearing off the capital markets and squealing for Zone A prime on a very large scale ???

bloomberg.com/apps/news?pid= … E&refer=uk

Scenario January 2007
Property Value EUR 1,000,000
Bank offers leverage to 85% LTV with a 5 year interest only mortgage loan
Borrower has to put in EUR150k of equity

5 years down the line, commercial property has fallen by 20% and in the post credit crunch era the banks lending policy has been clipped back to historiacal 75% LTV. Property now worth EUR800k and banks only offering EUR 600k of debt, therefore EUR250k more equity required from borrower to pay down the outstanding EUR850k of debt outstanding, to prevent the bank from foreclosing.

With a securitised loan the loss will be the bond holders so there will be little incentive on the original bank to step back in and fund the new debt. A balance sheet lender like the big Irish banks could just rollover the debt, but they would have to mark to market the loan down and take a loss.

Also with commercial real estate lending much of the return is made from the upfront arrangement fees that are charged at the start of the loan. The longer that that loan stays on the balance sheet the worse the returns are.

If you rollover that loan for another two years it is using up cash that could be applied to more profitable lending elsewhere.

Also when the commercial property is in effective negative equity as in the example above, there is little incentive to post a further EUR250k, as it is just throwing good money after bad. Commercial acquisition finance is non-recouse and that means that the borrower can effectively leave the keys in the door and walk away.

yiz predicted the Ryanair profit warnin’.

rte.ie/business/2008/0204/ryanair.html