According to IPD’s Irish Quarterly Index, total returns in Irish commercial property picked up in Q2 2007 to 3%, compared to the previous quarter (2.2%). The return on Irish property also outperformed the 2.1% return seen in the UK in Q2 2007.

For the first time in six years, industrials were marginally the best performing sector in Q2, with a total return of 3.2%. Retail returns in this period were 3.1% and last were office returns at 2.9%. The strong return in industrial was down to yield movements. Equivalent yields fell by 10 basis points in the quarter, adding 1.9% to capital values.

The strong returns in retail and office were down to the continued expansion in rental growth, which was 2.4% in retail and 1.7% in offices in Q2. Yields in retail and offices fell by one basis point in Q2, which added 0.3% to capital values in each sector.

Angela Sheahan, IPD research manager, said: “In contrast to the previous four years, where property returns in Ireland have been led by yield compression and rental growth has been slow, Q2 2007 shows yield impacts slowing and returns starting to be driven by robust rental growth.”