Market Report:The Dublin office market had one of its best years in recent times in 2006 when it saw the highest level of take-up for 15 years, a substantial drop in the vacancy rate, and an annual rise of 26 per cent in rents for prime city centre offices.
Prime rents rose to €646 per sq m (€60 per sq ft) as the vacancy rate dropped from 15 per cent at the end of 2005 to 12 per cent last year, according to the annual Jones Lang LaSalle Dublin Office Market Report.
"It was a very positive year by any standards for the capital's office market with significant advances on all fronts," said Dr Clare Eriksson, head of research at Jones Lang LaSalle in Dublin.
One of the trends reversed over previous years was the location of most of the new office space coming to the market: in 2006 it was almost all in the city centre, unlike 2005 when it was mostly in the suburbs.
By the end of the year, the total Dublin office market had grown to 2,794,383sq m (30.078 million sq ft), an increase of 6 per cent during the year. Just over half (54 per cent) of all the city's offices are in the traditional central business district (CBD) of Dublin 1, 2 and 4, while a third (34 per cent) of the total is in Dublin 2 alone.
Dublin 2 saw its stock increase by the largest amount last year with 110,456sq m (1.188 million sq ft) added during the 12 months. Large office schemes to come to the market in Dublin 2 included 75 St Stephen's Green, Georges Court, Castle Place on George's Street and Park Place.
Outside of the CBD, the city edge region currently has the largest representation with 11 per cent of office stock and also had the highest number of completions among suburban locations in 2006 with 5,416sq m (58,297sq ft) of new offices.
Among the larger offices new to the city edge area in 2006 were The Guild and Marrowbone Lane, both in Dublin 8.
Overall, the level of annual office completions grew by 30 per cent to 143,919sq m (1.549 million sq ft) in 2006 with 93 per cent of the new office buildings located in the city centre.
Most of the new buildings came to the market in the third quarter of the year and supply slowed during the last quarter. "The strength of the market was demonstrated by the fact that the vacancy rates continued to decline in spite of the increase in completions," Dr Eriksson said.
The report shows that a further 272,621sq m (2.934 million sq ft) is under construction and due to be completed in 2007 while another 52,268sq m (562,607sq ft) of office space is due to be delivered in 2008.
Of the stock under construction, 36 per cent is pre-let. Among the major developments under construction are Elm Park on the Merrion Road, AIB Bankcentre, South Quarter beside Heuston Station and Spencer Dock.
In addition to the schemes under construction, planning permission has also been granted for a further 216,592sq m (2.331 million sq ft) of office space.
Almost one-third of the take-up in 2006 was accounted for by the financial and insurance sectors with banks in the forefront.
"The surge in demand by banks illustrates that the banking business sector is obviously a leading occupier and driver of the Dublin office market," said Dr Eriksson.
Other notable trends were increased demand from the public administration sector, up fivefold from 7,959sq m (85,670sq ft) in 2005 to 43,729sq m (470,695sq ft) in 2006.
The media sector also had a higher participation level in the office leasing market in 2006, responsible for over 10 per cent of take-up.
But business services, which had driven demand in the Dublin office market for the last few years, decreased to 41,529sq m (447,014sq ft) from 61,182sq m (658,557sq ft) in 2005.
