Take-up of space in the Dublin office market for the first half of this year came in at around 100,000sq m – similar to the same period in 2015 – underlining strong levels of occupier demand.
This is according to the latest review from agent HWBC which notes that “real levels of activity on the ground” are not reflected in the take-up figures as over 80,000sq m of space is reserved or at various stages of pre-contract due diligence. As a result HWBC is predicting that full-year take-up for this year will be around 220,000sq m, well ahead of the 10-year average of 180,000sq m.
It says there is 292,000sq m of available office space in the city which gives a vacancy rate of 8 per cent. New completions in 2016 will come in at just 8,100sq m, while 330,000sq m of new office space is currently under construction in the central business district.
HWBC says it is "too early to gauge the effect of Brexit on the Dublin office market" but suggests it is reasonable to assume that Dublin could be one of the few beneficiaries of the vote with potential increased FDI from the UK, Europe and the US.
Implications
“There is no real evidence yet of increased inquiries from the UK,” says HWBC’s
Paul Scannell
, “but we expect this to become more pronounced by year-end, with interest particularly from the financial and professional sectors.
“Any increased interest from companies relocating to Dublin is likely to play out over the next two years as more clarity emerges on the real implications for British business of leaving the EU.
“We expect a number of large multinationals to run the rule over Dublin and other competing markets, such as Paris and Frankfurt, over the next 12 months, so they are ready to press the buttons on a move if required. Some of the larger occupiers may even consider securing options on space under construction to ensure they can secure the required space in the preferred location.”
HWBC says the lack of central business district space is still putting upward pressure on prime rents which are now at €620 per square metre. Some smaller lettings are being agreed at €645 per square metre, it says, and this rental level will become “established for prime space by the end of the year”.
Larger occupiers seeking new central business district space are now required to commit for a minimum of 15 years term certain as developers take advantage of market conditions and lack of supply. Tenant incentives, like rent-free periods, are also under pressure and are typically at three months for each five-year term. “But larger tenants can still agree attractive packages particularly for early pre-lets,” says Mr Scannell.
Suburbs
As pressure for central business district space intensifies, HWBC notes that activity in the suburbs is “strong” with take-up in Dublin 18 accounting for 11 per cent of the total so far this year.
Sandyford, Central Park and South County Business Park are the most popular locations, with Ardagh choosing Pelham House in the latter location for its new headquarters.
Further out Cherrywood is seeing renewed occupier interest given its competitive rents and access to the Luas, M50 and N11.
Mr Scannell says there are no signs of the market being oversupplied even with 330,000sq m under construction for completion over the next two years and over a third of this space already pre-committed.
“With 300,000sq m plus of identified market demand, we don’t expect supply and demand levels to reach equilibrium until at least the end of 2018.”
