BNP Paribas Real Estate has forecast a slowdown in the pace of rental growth for Dublin’s prime office market in 2016 and 2017. The prediction comes after prime rents increased by 22 per cent last year, driven by a stronger than expected performance of the economy and the limited supply of top-end office space.
Joan Henry, head of research at BNP, said prime rents would continue to increase but at an expected rate of 5 per cent over this year.
Increases at this level would see rents settle at close to €620 per sq m (€57 per sq ft) by the end of 2016 with further modest increases of around 2.5 per cent expected in 2017.
“While there may be a small handful of deals done at rental levels stronger than the forecast €620 per sq m in 2016, for example a pre-let on new space on Molesworth Street or St Stephen’s Green, these stronger levels, if reached, are not expected to be representative of the rents that will be achieved across the other locations in the north and south docklands and the remainder of Dublin 2 and 4. The main reason for this is that the supply pipeline is expected to have delivered just over 200,000sq m of new and refurbished space by the end of 2016 with most of it in the central business district.”
Rapid pace
Meanwhile, Declan O’Reilly, who handles office lettings for agents
Knight Frank
, has dismissed reports that there is a danger of an over-supply of new office space in the Dublin market.
He said the rapid pace of job creation had led to a shortage of space in Dublin and effectively the doubling in rents from a low of €28 to €55 per sq ft. While the industry was initially slow to cater to this emerging demand a number of new developments were now under way. Knight Frank had established that this was not the case and that the quantum of space to be delivered would be insufficient to cater for the projected growth in employment.
O’Reilly estimated that while there would be a need for 2 million sq ft annually between 2016 and 2018 the actual supply would be around 1.5 million sq ft in each of those years.
