Commercial property sector collapse

[blacbloc]

According to Gerald Celente the commercial property sector collpase, which has not yet swung into force, is set to make the subprime collapse seem relatively unimportant (!). Does anyone know how this is likely to play out in Ireland? I'm thinking of projects like this one in Cork:

The Elysian Cork Ireland

Now almost completely empty - as are a number of other new commercial buildings in prime locations around the city. How vulnerable are we to this or have we felt the full effects already?

[Factorem]

Office space everywhere.

Yet the rent is still exhorbitant.

Any would-be entrepreneur would be better off starting up abroad than get involved in a snaky Irish commercial property agreement that will bleed every last drop of blood from your business.

The cost of rent should have been addressed in 2002/2003. Competitiveness is out the window at this stage.

[cactusflower]

A lot of these buildings are being used as collateral against loans that were invested in more land and buildings or other investments. Their book value is dependent on the rent level. If they cut the rent and let the building, the banks will have to admit the real value of the collateral.

Commercial rents are being kept high to pay off property loans and because people who have tenants have been able to squeeze the money out of them.

There will be a chain of retail and commercial business collapses, the numbers of empty buildings will soar. Rents will drop, but there is very great resistance to it because the
situation of the landlord may be desperate.

Even with rent cuts, there will be empty buildings as the volume of business is collapsing.

[feargach]

Irish buildings, residential and commercial, are a toxic asset. Owning them is hell. If you sell or rent at anything below peak 2006 values, the bailiffs will take your home furniture.

[blacbloc]

A lot of these buildings are being used as collateral against loans that were invested in more land and buildings or other investments. Their book value is dependent on the rent level. If they cut the rent and let the building, the banks will have to admit the real value of the collateral.

Commercial rents are being kept high to pay off property loans and because people who have tenants have been able to squeeze the money out of them.

There will be a chain of retail and commercial business collapses, the numbers of empty buildings will soar. Rents will drop, but there is very great resistance to it because the
situation of the landlord may be desperate.

Even with rent cuts, there will be empty buildings as the volume of business is collapsing.

Do you know of any report about the projected time line for these effects to play out cactus?

[Factorem]

Their book value is dependent on the rent level.

Thanks for that insight. It's the only reason rents are still so exhorbitant.

Bring on the crash. The situation as it stands, where rents are needlessly kept high, is doing serious damage to the economy.

Why are we faffing around with teh Energy Regulator trying to get 10% cuts here and there on the price of gas/electricity? It's 50%+ drops in rent and wages/salaries is what's needed.

Imagine if rent, salaries, professional fees, energy came down to 1999 levels. Then we'd have a competitive country once again and people would actually work their asses off.

Right now everyone's scared at what's coming and are in full blown survival mode. Nobody's taking risks and nobody's expanding/hiring/innovating.

[Factorem]

Irish buildings, residential and commercial, are a toxic asset. Owning them is hell. If you sell or rent at anything below peak 2006 values, the bailiffs will take your home furniture.

There's a massive group of 5/6 storey commercial buildings on the East Wall Road beside East Point Business Park that have been lying idle since they were built. How I'd love to have gotten a little corner inside one of those back in 2007 when I was in business.

[seabhcan]

Office space everywhere.

Yet the rent is still exhorbitant.

Any would-be entrepreneur would be better off starting up abroad than get involved in a snaky Irish commercial property agreement that will bleed every last drop of blood from your business.

The cost of rent should have been addressed in 2002/2003. Competitiveness is out the window at this stage.

I recently rented a small office in Dublin city center. Got a 60% reduction on the advertised price without much effort and a 3 month lease rather than a 12 month - so I can renegotiate month by month.

Rents are collapsing.

[feargach]

Thanks for that insight. It's the only reason rents are still so exhorbitant.

Imagine if rent, salaries, professional fees, energy came down to 1999 levels. Then we'd have a competitive country once again and people would actually work their asses off.

I have a thread in this folder about just that: forcing prices down 20% in order to get the cost of workplaces down. Maybe you'd like to contribute.

[Benz]

Do you know of any report about the projected time line for these effects to play out cactus?

as a wise man once said, "there are no certainties about the future", however within 18 months about 33% of all retail businesses will close, with the border being so close to most of the population that figure could edge even higher, perhaps to 50%.

These are simply shocking statistics if they come to pass, and I believe that they will.

That's 50% of retail units left lying empty. Landlords still have not got their heads around the fact that the rules of the game have changed. They are trying to enforce upwards only rent reviews which is not sustainable in the short, medium or long term.

At a best guess rents will fall 50% from their peak, perhaps more.

As evidence of what is happening out there, just look at the (supposedly) 'primary' shopping area of Dublin, i.e. Grafton Street. There are currently 15 properties on Grafton Street available for rent. There is no precedent in Irish retail for such a situation. And bear in mind too that Grafton Street has a huge amount of footfall on a daily basis and they still can't make a profit out of it.

If you're anywhere near Dublin some day take a walk down Dawson Street and Nassau Street and the interconnecting streets. Almost every business around there is in the 'luxury' business, shirt shops (of which one just closed 2 weeks ago), restaurants, candle shops, camera shops, one place that sells 'designer' vases for €1,000!, a whiskey shop!, pregnancy stores, hairdressers, jewelery stores and even recruitment agencies. Those kind of shops account for well over 50% of the businesses around there. I walk those streets daily and I can't help but think that they will be a retail ghost town inside of 12 - 18 months.

Dunnes has pulled out of Grafton Street, Pia Bang is pulling out of South Anne Street, Henry Jermyn shirts and Guess Jeans has pulled out of South Anne Street. The Telephone Centre and Bagel Factory have pulled out of Dawson StreetThe Hackett clothing store may be on borrowed time...

Sorry for the doom and gloom, I wish the future was brighter but we're a long way from bottom here.

The upside of this of course is that in about 2 years time it will be a very good time to start a business, low rents, low wages and an economy perhaps on the turn. Fingers crossed!