The survey of business sentiment in the commercial property market was commissioned by Bank of Scotland (Ireland) and carried out in November 2006 by the Society of Chartered Surveyors and the Dublin Institute of Technology. The results represent the forth set of figures in an index charting sentiment in the commercial property market as a whole and broken into three sectors: office, retail and industry.

Commenting on the survey, Declan O'Hanlon, head of property banking at Bank of Scotland (Ireland) said:

"Transport infrastructure is a key consideration for industry, particularly in Co Dublin and the city. There is no doubt that the Port Tunnel will have a positive effect and we have already seen an increase in activity in north Dublin.

"What is interesting here is that the added congestion on the M50 motorway will have an adverse effect on industry in south Dublin, particularly in the short to medium term, pending the M50 upgrade."

The authors of the report say the office sector has recovered from the fall in sentiment indicated in the May 2006 survey and confidence in the sector is now comfortably ahead of its starting position in May 2005.

Sentiment in the industrial sector, which has been somewhat more volatile than the other two sectors, is now on a par with its starting level in May 2005. Sentiment in the retail sector, however, has fallen continuously since the start date. This may reflect the particularly strong sentiment that existed at the time of the formation of the index.

While a higher proportion of surveyors than in May 2006 expect capital values to increase, they are less optimistic about the scale of this increase.

Expectations are most bullish for the office sector.

Here there is an improvement in sentiment since the last survey with 94% of responses forecasting growth in capital values across the sector as a whole. Most of the improved sentiment is at the lower end of growth ie growth of less than five percent.

In relation to capital values across the retail market, expectations remain very positive and overall growth forecasts have improved slightly since May 2006.

However, the level of growth expected is a good deal lower than in May.

Sentiment in relation to capital values in the industrial sector has strengthened, with over three-quarters of respondents forecasting an increase in capital values across the sector as a whole.

The dominant view across the commercial market as a whole is that yields will remain static.

Again, rent-free periods emerge as a common thread across the overall commercial market in relation to lease structures. In all three sectors, respondents identified rent-free periods and break clauses as features of current leases, broadly similar to the May 2006 survey.

In relation to the expected level of activity - as measured by transactions and enquiries - in the office and industrial sectors, sentiment is again broadly similar to the May 2006 survey, but somewhat weaker in the retail sector.

The mood in relation to occupier demand is varied across the market with a fall in the proportion expecting an increase in the retail sector, no change in the office sector and a dramatic recovery in the industrial sector.

The picture regarding investment demand is much more stable with little change in forecasts since May 2006.