Market ReportDublin's office market can expect a "bumper year", according to a market survey. Vacancy rates in the capital are falling while rents are firming and expected to rise steadily through 2006.
Hamilton Osborne King's office market watch presents a positive picture for Dublin. Its study was conducted in conjunction with Trinity College Dublin's Centre for Urban and Regional Studies. The report predicts that "2006 is set to be a bumper year for the office market with 230,000sq m (2.475 million sq ft) of new space due for completion".
It states that this will be the second highest level of modern office space to be built in the city. "More than half of this space will be in Dublin 2, with less than 5 per cent in the suburbs. Seven of the 10 largest developments are already taken up."
The vacancy rate in Dublin 4 has dropped to below 7 per cent, helped by two very large deals, the AIB HQ and the letting of 11,000sq m (118,403sq ft) of new space at the Gasworks in Barrow Street to Google.
Overall, however, the total office vacancy rate has actually risen slightly to 16.3 per cent from 15.8 per cent at the end of 2004. The report attributes this rise to a spike in the vacancy rate in Dublin 1, 7 and 8, caused by a high level of completions in these areas. It also notes that the vacancy rate in the IFSC doubled during 2005 to 11.5 per cent.
Space reaching completion in 2005 amounted to 94,000 sq m (1,011,807sq ft), "a significant pick-up of 62 per cent on the amount completed in 2004", the report states.
There were 18 buildings completed in the greater Dublin area last year, nine over 5,000sq m (53,820sq ft). The inner fringe of Dublin 1, 7 and 8 accounted for the highest proportion of completed space (37 per cent) with 15 per cent of the space completed in Dublin 2. No space reached completion in Dublin 4, the IFSC or Blackrock-Dún Laoghaire in 2005, the report said. Take up in 2005 was somewhat lower than the previous year but remained high by historical standards, the HOK report indicates. A very busy 2004 saw demand increase by 33 per cent from 150,000sq m (1,614,585sq ft) to almost 200,000sq m (2,152,780sq ft). Take up last year reached a substantial 147,000sq m (1,582,293sq ft). A full 17 of the 20 largest transactions were for space in new buildings.
Dublin 4 led the way in take up during the year, amounting to 31 per cent of the total, this despite the fact that Dublin 4 only accounts for 12 per cent of total office stock, the report states. As already indicated, however, the figures are dependent on the large AIB and Google deals.
The outer suburbs accounted for 33 per cent of total take up last year, compared to 43 per cent in 2004. This represented an ongoing, significant fall from the 2001-2003 period when the majority of space taken up was in the suburbs.
The slight rise in the overall vacancy rate (0.5 per cent) was largely due to the high completion rate, the HOK report suggests, adding that it had anticipated this change in its office survey for September 2005.
"We expect the underlying trend in this take up and vacancy pattern to continue for the rest of 2006, with occupiers looking to the new space in core areas or high quality space in new developments," the report states. "The overall vacancy rate is likely to remain close to this level in 2006 and 2007."
Rental growth in city centre areas has also returned, the HOK study says. This is evident in the larger pre-let schemes, but the level of incentives granted to achieve this growth was "as high if not higher than ever", HOK adds.
"The level of incentives available with existing medium-sized units is beginning to fall, however, and rents are beginning to strengthen in this sector of the market. We expect that rents will continue to rise during 2006."
