THE VACANCY rate in the Dublin office market has reached an all time high of 21.2 per cent, according to the latest office report from DTZ Sherry Fitz-Gerald.
The report estimates that, at the end of September, the level of vacant space reached a new record high of 696,800sq m (7.5 million sq ft) – a 61 per cent increase on the 268,300sq m (2.888 million sq ft) available in September, 2008.
The large volume of space on the market reflected robust development activity during the year. In addition, there had been a significant increase in the quantity of second-hand space released to the market during the past 12 months, evidence of existing occupiers consolidating space and releasing surplus accommodation for letting.
DTZ said that the 21.2 per cent vacancy rate compared to 14 per cent 12 months previously.
“It is important to note that this rate is now triple the equilibrium rate of 7 per cent,” it says. “If take-up persists at current low levels and the release of surplus space for subletting continues, it will result in unprecedented vacancy rates with an inevitable deterioration in rental levels. However, it is important to note that a significant proportion of this vacant space is older stock that has been on the market for a considerable number of years and therefore arguably masking the true vacancy rate in the market.”
On a positive note, the report said that the quantity of available space under active negotiation at the end of the third quarter rose to 7 per cent. This represented a significant increase on previous quarters, demonstrating that uncertainty among potential occupiers is diminishing as the emergence of increasing economic activity suggests that the worst would appear to be behind the economy.
The central business district accounted for 268,500sq m (2.89 million sq ft) or 39 per cent of the total available space at the end of September, according to DTZ. This was almost double the level of supply recorded during the same period in 2008. The corresponding vacancy rate stood at 15.2 per cent, up from 8.1 per cent recorded 12 months previously. About 31,400sq m (338,000sq ft) was under active negotiation at the end of the quarter which, if taken up, could reduce the vacancy rate to 13.4 per cent.
An analysis of the spread of available space reveals that the suburbs continued to account for most of the vacant accommodation at 42 per cent. This would suggest that the vacancy rate in this region was significantly greater than the overall market rate of 21.2 per cent.
The prime region accounted for a further 36 per cent of the available space with the secondary region responsible for 20 per cent. The IFSC/docklands accounted for the remainder of the space.
The report noted that 52 per cent of all vacant space has been on the market for 12 months and less. The occupation of a pre-let premises of 15,300sq m (164,688sq ft) by State Street Bank accounted for a large proportion of the space occupied in the last quarter. In addition, about 1,100sq m (11,840sq ft) was occupied by Facebook at Hanover Reach.
DTZ reported that headline rents remained relatively stable during the last quarter with the decline in rents beginning to ease. Headline quoting rents for third generation prime accommodation ranged from €377 to €592 per sq m (€35 to €55 per sq ft) at the end of the quarter with the majority of deals taking place in the €350 to €403 per sq m (€32.5 to €37.5 per sq ft) range.
Headline quoting rents for second-hand third generation space in the central business district were closer to €323 per sq m (€30 per sq ft), the report said.
