Despite the Government's policy of decentralisation, the State accounted for 16.4 per cent of Dublin office take-up in 2006 compared to 5 per cent in 2005, writes Jack Fagan

The take-up of office space in Dublin by State agencies in 2006 increased by more than four times the figure for the previous year despite the Government's commitment to decentralisation.

The figures, which are included in Lisney's latest Dublin office market update, show that the public sector was responsible for renting 38,240sq m (411,612sq ft) of space last year compared to only 9,345sq m (100,589sq ft) in 2005.

The sharp increase in demand for space means that the State accounted for 16.4 per cent of total take-up compared to only 5 per cent in 2005.

Lisney economist John McCartney said that, as a percentage of total take-up, the public sector is now almost back to where it was in 2003. In December of that year, the then minister for finance, Mr McCreevy, announced the decentralisation of 10,300 public servants to 53 centres around the country.

However, McCartney urges caution in interpreting the figures. They do not directly measure the total amount of space occupied by any organisation or sector at a given point in time.

He also noted that, as the number of public sector employees has grown by 16,300 since December 2003, high take-up of office space in Dublin need not necessarily be inconsistent with decentralisation.

The Lisney study shows that the total take-up of office space in Dublin reached an all time high in 2006 of 233,612sq m (2,514,576sq ft) compared to 206,284sq m (2,220,420sq ft) in 2005.

Most of the letting activity was in the city centre where 64 per cent of the take-up occurred. The financial services sector continued to expand at a rapid rate and accounted for an unusually high 33 per cent of all take-up. The overall vacancy rate stands at 11.7 per cent with the city centre down to 8.6 per cent.

Paul Hipwell of Lisney says that with an acute shortage of new high quality office buildings on the cards, rents were on course to hit €750 per sq m (€69.67 per sq ft) in the next 12 months.

"This is not really new territory for the office market," says Hipwell. "Pre-9/11 rents for prime office space peaked in 2001 at just under €700 per sq m. The office market is now a little more mature and less volatile, and perhaps we will continue to experience a more gradual and steady return over the next year to the rental levels achieved pre-9/11."