With the acute shortage of houses in the Dublin area continuing to attract considerable attention, the ongoing scarcity of grade A office space for new and expanding firms in the capital’s central business district (CBD) has gone almost unnoticed.
A new study by agents DTZ Sherry FitzGerald has found that the vacancy rate for grade A offices in the CBD has declined rapidly over the past 12 months and stood at 4 per cent at the end of June.
Furthermore, there remains an ongoing shortage of offices capable of accommodating large-scale firms. An analysis of the net stock available reveals that there are only two units available greater than 5,000sq m in size.
At the midpoint of this year, the total quantity of available office space in the city stood at 145,000sq m. While supply increased marginally during the past three-month period, overall supply levels across the CBD declined by more than 30 per cent over the course of the past 12 months.
The rapid erosion in supply was also evident in the corresponding vacancy rate which declined to 8.5 per cent at the end of June, down from 12 per cent recorded 12 months previously. With 41,550sq m either signed or reserved at the end of the quarter, the true net availability declined to 103,850sq m, equating to a vacancy rate of 6.1 per cent.
The report, written by Marian Finnegan, head of research at DTZ, said that given the strength of demand for grade A office space, not surprisingly the stock of such accommodation continues to decline more rapidly.
The total quantity of grade A space stood at 65,450sq m at the end of June, down 50 per cent on the corresponding quarter in 2014 and equal to 45 per cent of all CBD supply. Furthermore, the Grade A vacancy rate, net of signed and reserved space, stood at a critically low level of 41,050sq m.
Vacancy rate
The report shows that Dublin’s South Docklands remains the most supply-constrained of the CBD sub-markets, with supply declining notably during the second quarter to stand at 13,300sq m. Availability in the South Docklands was critically low, with a present net vacancy rate of 4.1 per cent, the lowest of all the CBD areas.
Take up in the South Docklands in the first six months of the year alone stood at 11,500sq m. The pressure on supply was unlikely to be relieved in the short term as there was just one development currently under construction and it was pre-let to Airbnb. The area was expected to witness further upwards pressure on rents in 2015/2016.
DTZ said that while there had been an increase in the number of cranes on the Dublin skyline during the last quarter, a significant proportion of the office buildings that were under construction had already been pre-let and, as a result, the pipeline supply in the CBD remained limited.
The second quarter of 2015 saw an additional 21,750sq m commence construction. This brought the total volume of stock under construction to 85,100sq m across nine developments.
However, the supply of new office space which could be delivered to the market was being eroded by pre-letting activity. At the end of June, almost two-thirds of the space under construction was pre-let.
Robust activity
Ronan Corbett
, DTZ’s head of business space, said that robust activity in the opening half of 2015 was bolstered by sustained demand from the IT/telecommunictions sector which continued to be the dominant source of demand, accounting for 34 per cent of the overall take-up.
However, the sector’s share of activity in the CBD had declined over the course of the past 12 months. The more traditional CBD occupants such as legal firms, accountants and business service organisations increased their share of activity to 26 per cent during the first six months of this year.
