The soaring price of residential property, particularly in Dublin, has dominated the headlines in recent years. But unnoticed by many, the office property market has enjoyed a mini-boom of its own.
As the economy has grown, demand for office space from both Irish and overseas firms has surged, far outstripping the supply available and creating a very tight situation in the market in central Dublin. Some 46 per cent of Dublin's office space was taken up by overseas firms moving into the capital last year, while demand from local firms has also increased.
The result has been to drive vacancy rates down to little more than two per cent at present, while rents have increased sharply. Estate agents estimate that prime office rents for city centre accommodation range from £22 to £25 per sq ft at present, more than double Belfast rates. Certain tenants, such as those looking for short-term leases, have been known to pay up to £30 for office space in Dublin 2 or 4.
"There is very, very little first or second generation accommodation, which has partly to do with the strong economy, but is also because we have gone from being a blue collar economy to a white collar economy," says Killian O'Higgins, managing director of DTZ Sherry Fitzgerald.
Many of Ireland's new industries, particularly in the hi-tech sector, need office space rather than traditional industrial premises. Call centres, tele-sales and tele-marketing divisions and "back office" functions all need office accommodation, rather than warehouses or units suited for manufacturing.
This has led to an increase in high-quality office accommodation on industrial estates around Dublin's periphery, taking some of the pressure off the city centre. But traditional city centre demand shows no imminent sign of decline.
"A lot of the industries coming in are looking for young people and young people like the city," says Mr O'Higgins, noting that Dublin's position as the only English-speaking financial centre in the euro zone is likely to further fuel demand.
So if demand is set to remain strong, what of supply? Market analysts say the next 18 months will be a crucial period in determining the amount of office supply that comes on the Irish market.
A number of developments are currently under way across the city, including a speculative development of 147,000 sq ft of office space at Grand Canal Plaza; 85,000 sq ft at Hatch Street and 112,000 sq ft at the Sweepstakes in Ballsbridge. However, estate agents say most of the development nearing completion is already let or actively under negotiation, leaving little for new arrivals or those about to expand.
However, a number of developers are expected to apply for planning permission for sites they own in suburban areas. Dunloe Ewart, which has started construction on a 105,000 sq ft science and technology site at Cherrywood, in Co Dublin, is about to apply for planning permission for the second phase of 100,000 sq ft.
Others who may seek planning permission include Green Property, which purchased development sites at Sandyford industrial estate earlier this year. In recent years, and particularly since Microsoft's decision to locate its Irish operations there, Sandyford has emerged as a significant out-of-town office location. Other out-of-town areas likely to see such development include Citywest, Parkwest, Blanchardstown and Bray. Estate agents estimate that if all the potential schemes around Dublin's periphery go through, there would be oversupply in the suburban ring road locations, although it is unlikely that all will get the nod at the same time or be built simultaneously.
BUT if there are signs that developers are moving to meet demand in suburban areas, property market observers expect there will continue to be a lack of office space in the city centre for at least the next two years. The International Financial Services Centre (IFSC) is occupied or pre-let and developments in other parts of the docklands - described by one estate agent as the "great white hope" for the city centre - have been slow to come on stream as developers wait for tax incentives to be clarified.
Meanwhile, although tenants are happy to move to other areas north of the Liffey, there is little available to them at present. A planning application is in for the second phase of the East Point Business Park but like many of the suburban locations, this will be restricted to IDA-style science and technology companies. Banking and insurance firms, solicitors and accountants will not be eligible to rent space at the park.
The new national conference centre should speed development along the quays but it will take time before other parts of the north inner city are developed. Estate agents believe that the north quay frontage will first have to be developed in full before developers start to build back toward the heart of the inner city.
"There is a lack of good quality sites for prime occupiers who want prestigious sites and I would expect a lack of good quality space in the city centre right through 1999," says Roland O'Connell, director at Hamilton Osborne King. While the IDA's policy of encouraging companies to move to the regions may take some of the pressure off the Dublin market, it will not relieve it entirely as there will always be firms who need to locate in the capital.
The availability of office space in central Dublin is thus likely to remain tight as long as the economy remains buoyant - good news for property owners as it should ensure that rents remain firm, but less so for cost-conscious firms seeking accommodation.
