Office take-up in Dublin rises 62% in Q1

There was a 62 per cent jump in the amount of space let in the Dublin office market in the first quarter of 2016 compared with the same period last year.

This is according to the latest review of the sector by Knight Frank which notes that the "take-up in 2016 indicates that the business community has not been delaying decisions in the context of uncertainty arising from the general election and Brexit vote. In fact, the Brexit referendum has resulted in an increase in the number of enquiries from UK-based companies looking at Ireland as a base in the event of a vote in favour of leaving."

Knight Frank says that 67,189sq m (723,221sq ft) of space was let in Dublin during the first quarter and the increase in take-up was driven by a relatively large average deal size of 1,244sq m (13,393sq ft) across 54 transactions compared to an average size of 600sq m (6,463sq ft) across 69 deals in the same period last year.

Prime rents remain steady at €619 per sq m (€57.50 per sq ft), according to the report, while the first quarter vacancy declined to 8.3 per cent.

Interestingly, the Dublin 3 postcode accounted for 27 per cent of the market and this helped boost the city’s “fringe” market share to 32 per cent. But this is still well behind the city centre which accounts for 47 per cent of the market.

Activity in Dublin 3 was led by the ESB taking 11,164sq m (120,170sq ft) of space at the Gateway development on East Wall Road while the €150 million redevelopment of its Fitzwilliam Street HQ takes place. Another big deal in D3 was professional services firm Avarto taking 5,853sq m (63,000sq ft) at Eastpoint Business Park at €209.90 per sq m (€19.50 per sq ft).

The Dublin 2 postcode is still the busiest part of the capital’s office market with a 34 per cent market share, according to Knight Frank.

Big deals in this postcode during in the first quarter of 2016 included Fidelity International taking 6,317sq m (68,000sq ft) at George's Quay House at €527.43 per sq m (€49 per sq ft) and Hedgeserv signing up for 1,752sq m (18,855sq ft) at One Park Place for €592 per sq m (€55 per sq ft).

Overall, the State accounted for 29 per cent of deals in the first quarter – a big change after years of retrenchment – while the technology/media sector accounted for 25 per cent, professional services 23 per cent and finance 18 per cent.

Knight Frank points out that the first quarter of the year “saw the delivery of a number of significant new office buildings to the market”, including the 5,667sq m (61,000sq ft) LXV building on St Stephen’s Green and 8,306sq m (89,400sq ft) at One Airport Central.

Buildings nearing completion include 6,968sq m (75,000sq ft) at Block 2 and 3 in the Miesian Plaza (the former Bank of Ireland HQ on Baggot Street), 11,984sq m (129,000sq ft) at the corner of Earlsfort Terrace and Hatch Street, and 3,345sq m (36,000sq ft) at 21 Charlemont.

“The delivery of new office stock will begin to address the severe shortage of availability options for occupiers, even if we are a couple of years away from the quantum being of a sufficient size to have a significant effect on rental inflation,” according to Knight Frank.

However, the investment market was down 34 per cent as €744 million worth of Dublin offices changed hands.

Two of the top three sales were to European investment funds but US funds sold some €100 million worth of Dublin investments. Kennedy Wilson was the sole US buyer in the market with the purchase of Blackrock Business Park for €14.5 million as prime yields remained steady at 4.5 per cent.