MarketReport:2007 looks like being another record breaking year for the Dublin office market, according to Marion Finnegan, chief economist with the estate agent DTZ Sherry FitzGerald.
In her latest report for the first six months of 2007, she says that takeup of space is likely to reach, if not exceed, 250,000sq m (2.7m sq ft). This follows another quarter of very robust activity bringing the total quanity of newly occupied space in the first six months to 160,500sq m (1.8m sq ft).
However, the report also cautions that the supply levels remain a concern with the vacancy rate persisting in double digits, a factor that is likely to continue in the medium term. In particular, the volume of space rose slightly during the last three months to reach 421,700sq m (4.5m sq ft)though more than a quarter of it was under active negotiation. The quantity of space under construction had also remained very strong at 336,000sq m (3.6m sq ft) at the end of June, most of it in speculative developments.
The report shows that the second quarter of 2007 was another period of robust demand in the Dublin market with the quantity of accommodation taken up reaching 98,300sq m (1.05m sq ft) , one of the highest levels on record.
This was the fifth consecutive quarter where takeup activity has remained above the trend, highlighting underlying confidence levels in the market. It was important to note that a relatively large proportion of this space, 30 per cent, comprised deals that were signed prior to quarter two. That said the remaining space that was signed during the quarter was still significantly greater than the trend level of takeup.
Ms Finnegan found that the take up of 160,500sq m (1.8m sq ft) during the first half of 2007 was almost double the level recorded for the same period last year. A relatively large proportion of this space, 31 per cent, comprised only four buildings, including the PWC building at Spencer Dock and the Riverside 1V block at Sir John Rogerson's Quay let to Matheson Ormsby Prentice.
The professional sector dominated takeup activity, accounting for just under half all space newly occupied. The IT/telecommunications sector took a further 10 per cent of space while 8 per cent went to financial companies and 6 per cent was taken by the State.
The prime region remained the most highly sought after, accounting for the largest proportion of accommodation taken up in the first half of the year - 37 per cent. Just over a fifth was located in the IFSC/north docklands region while a third of all space newly occupied was in the suburbs.
The DTZ report also showed that the continuing high level of construction has meant that rental growth has been location sensitive. In particular the prime region witnessed the strongest growth in rental levels with headline rents for third generation blocks currently ranging between €538 and €592 per sq m (€50 to €55 per sq ft) with high specification units at the upper end of this range.
In some cases rents in excess of this are being achieved for smaller units. This is significantly ahead of the end of 2005 where headline rents in this location ranged from €455 to €484 per sq m (€42 to €45 per sq ft).
More recently headline rents for prime accommodation have stabilised as supply levels have increased although tenant incentives which were used to maintain stable rents in the past have also declined substantially in this region as demand strengthened.
The report also showed that in secondary locations rents average around €377 per sq m (€35 per sq ft) while in the suburbs rent levels vary from €136 to €296 per sq m (€12.63 to €27.49 per sq ft), depending on location and specification.