IN SPITE of job layoffs and the difficult economic climate, the Dublin office market is on target to exceed last year’s lettings of 78,500sq m (844,966sq ft) according to the latest office report from estate agent CB Richard Ellis.
However, Willie Dowling of the agency says that despite the increased transactional activity and the good level of inquiries, the medium to longer-term outlook still remains uncertain. Further consolidation in the financial services sector is a real threat while additional government austerity measures are also causing concern in the property industry.
“The three vital ingredients for a properly functioning office market – job creation, rental growth and availability of funding – are unlikely to materialise for some time. In the interim, the office sector will remain primarily reliant on company expansions and relocations and with little net absorption occurring, vacancy rates will remain high.”
According to the new report, Dublin office letting activity remained consistent in Q2 with 24,652sq m (265,352sq ft) of take-up recorded, compared with 24,954sq m (268,602sq ft) of lettings signed in the first three months of the year.
This represents a six per cent increase in take-up levels on an annual basis while recent quarterly lettings are more than double the level of quarterly take-up in 2009.
There were 35 individual letting transactions in the three months up to the end of June with 19 of them for space at or under 450sq m (4,844sq ft). Only three lettings signed in the period extended to more than 1,858sq m (19,999sq ft).
CBRE says there is currently a demand for 109,000sq m (10,126sq ft) of office accommodation in Dublin of which 79 per cent had a preference to locate in the city centre. Prime rents in the city are stable at €37 per sq m though rents for secondary blocks remain under downward pressure.
The report says the combination of an uncertain economic outlook, high vacancy rates and constrained access to development finance means that the start of the next development cycle in Dublin is still some considerable time off. After 2010 there are no new office schemes scheduled to be completed in Dublin. Even though prime rents are stabilising and the economy showing some signs of improvement, it will take some time for speculative development to resume, even if the development finance improves.
Other highlights from the CBRE report are that office investments reached €60 million during Q2 while prime office yields remain stable at 7.5 per cent.
