Office Market:Demand for high-spec city centre offices shows no sign of easing, writes Gretchen Friemann
Dublin's office market is set to continue its robust performance into the final half of this year despite the ongoing credit crunch and deepening concerns over the health of the US economy.
Headline rents in prime city centre areas have hit €700 per sq m (€65 per sq ft) and this figure could reach a record €753.5 per sq m (€70 per sq ft) when developer David Arnold unveils his eagerly awaited property at 1 Warrington Place within the next few months.
Designed by architects Henry J Lyons and Partners, the €30 million scheme, with its distinctive glass-fronted façade, is situated at the junction of Grand Canal and Lower Mount Street. Although the higher headline rent may test the market's appetite, Declan O'Reilly of agent HT Meagher O'Reilly is confident the "prime location and superior finish" will ensure strong demand for the 6,503sq m (70,000sq ft) property.
So far, developer Garrett Kelleher has been attracting the most expensive tenants with his refurbished former Department of Justice building at 75 St Stephen's Green.
Earlier this year the financial services company, Avoca Capital, agreed to pay €700 per sq m (€65 per sq ft) for a 25-year lease on one floor of the seven-storey office block, while this week it emerged that educational software giant, HM Riverdeep, had signed up for a short term lease at a similar rate.
However, the property's status as one of the most expensive places to work in the city centre could soon be eclipsed by Arnold's development, as demand for high-spec city centre offices shows no sign of easing.
According to James Mulhall of agent CB Richard Ellis, there is plenty of evidence to suggest that €753.5 per sq m (€70 per sq ft) is an "achievable" end-of-year target for smaller lettings.
He pointed out that developer Sean Dunne had just secured a rate of €673 per sq m (€62.5 per sq ft) at his docklands development, Riverside IV, where the airline leasing firm AWOS has rented an additional 500sq m (5,382sq ft).
However, Roland O'Connell, director of Savills HOK's office team, says these small transactions were not representative of the "general body of the market" and he claims prime rates were between €592 and €613.5 per sq m (€55 and €57 per sq ft).
He adds that rising rents in the city centre have helped the resurgent suburban sector which suffered a prolonged slump after the collapse of the internet bubble in 2001.
Earlier this year Royal Sun & Alliance significantly reduced its rental bill by relocating its Irish headquarters from central Dublin to Dundrum and its cost-cutting strategy has been replicated in Halifax Bank of Scotland's move to Cherrywood.
Bank of Ireland is also in the market for a suburban headquarters but, although rents have substantially increased in this sector, one source claimed they had "simply returned to levels achieved" prior to the technology downturn.
