After three years of unprecedented growth, the Dublin office market has, since the beginning of the year, experienced a sharp slowdown. This has been due in part to a much increased supply in the suburbs and also to upheaval in the technology sector.
Even more significantly, more than 50 per cent of the deals so far this year have involved lettings of less than five years.
The latest analysis of the office market by agents Insignia Richard Ellis Gunne shows that, at 286,943 sq ft, the take-up in the first quarter of the year was well down on the 683,681 sq ft let in the same period last year.
However with 993,358 sq ft reserved at this stage, take-up will be considerably boosted in the second and third quarters.
Marie Hunt, who heads the research department at the agency, says despite widespread fears that the Dublin office market was set to become over-supplied, office space is coming on stream in a controlled manner.
Several schemes due to become available this year has been delayed in the planning process. As a result, 2.7 million sq ft of new space will reach the market, of which 18 per cent has been pre-let. Significantly, 70 per cent of the new accommodation will be located in the suburbs.
Not surprisingly, the slowdown this year has been most acute in the suburbs, which, despite the high level of building activity, only accounted for 22 per cent of all lettings. Underlining the strong preference for city centre locations, 78 per cent of the take-up in the first three months was in the city, along with 62 per cent of the space reserved.
An estimated 35 per cent of take-up in the first quarter related to new buildings, while another 40 per cent of lettings were in second-hand blocks. Only 23 per cent of take-up since January was accounted for by pre-lettings, highlighting the slowdown in demand, compared with 50 per cent in the previous four quarters.
Interestingly, the £23.75 million (€30.16m) invested in the office market since the new year was concentrated in the city centre rather than in the suburbs, where most of the building activity is taking place.
The well-publicised problems in the technology sector and the poor performance of the NASDAQ, along with job losses, has led to a fall-off in demand for space from technology companies. In the first three months of the year they were responsible for only 32 per cent of take-up while business/services companies and the public sector accounted for 63 per cent of space allocated between them, on an almost equal basis.
Willy Dowling, who heads the office department at Insignia Richard Ellis Gunne, says that while there is no doubt about the evidence of a slowdown, most fundamentals remain positive.
Demand for well-located schemes is still strong, particularly in the central business district. Insignia still expects the overall take-up of space in 2001 to be in line with the 1.8 million sq ft allocated last year.
Insignia colleagues in the US now expect that the slowdown in the economy will persist for another six to 12 months.
