The latest Dublin office market research shows take-up in the first quarter of 2015 was down 30 per cent on Q1 2014.

However, Knight Frank in its Dublin office market overview Q1 2014, says overall take-up activity at 41,427sq m (445,920sq ft), "still represents an extremely healthy level of activity". It points to an increase in the number of deals completed in Q1 2015 over the same period last year – up 25 per cent from 55 to 69, with the average deal size reducing to 617sq m from 1,077sq m – as being indicative of more normal levels of activity after a record-breaking year in 2014.

The research found that 48 per cent of take-up in Q1 2015 focused on the city centre. Dublin 1 saw the largest volume of activity by postcode with 8,503sq m transacted, up from 4,726sq m in 2014.

Strong letting in the IFSC, at 6,780sq m, was behind this robust performance. In fact, take-up in the IFSC accounted for 34 per cent of the city centre market in Q1 2015 – compared to an average 7 per cent over the past five years.

Chronic shortage

Knight Frank points to a “chronic shortage of grade A space in the city centre” being behind the wave of capital expenditure in the IFSC. “With a couple of the IFSC deals recorded in the first quarter already achieving €37.50 per square foot (€3.50 per square metre),

Commerzbank

House and George’s Dock 3 refurbishments will set new benchmarks for the IFSC in this cycle, with rents in the late 40s (per sq ft) expected before the end of the year.

"Anticipating this pick-up in tenant activity, investors have been piling into the IFSC. The acquisition of 1 Harbourmaster Place by Irish Life for €49 million in the first quarter, representing a yield of 5.8 per cent, is one of the largest sales in the area over the past number of years. The 62,000sq ft block (€5,760sq m) is let with 11 years remaining to KPMG at €49 per square foot (€4.55 per square metre) and represents a good yardstick for gauging where IFSC valuations are right now."

A lack of available space in Dublin 2 is evidenced by the fall in take-up in the area from 18,491sq m in Q1 2014 to just 6,721sq m in Q1 2015, with Dropbox’s letting of 2,726sq m at One Park Place the only deal recorded in Dublin 2 of 929sq m or more compared to seven recorded over the same period last year.

Fringe activity

“With Dublin-wide vacancy at a reasonable 12.1 per cent and a severe shortage of available grade A floorspace in Dublin 2, occupiers are exploring non-core locations with fringe activity rising to 127,077sq ft (11,799sq m) across 13 deals, compared to just one letting of under 2,000sq ft (186sq m) completed during the same period last year. Pharmaceutical company Parexel’s taking of 28,128sq ft (2,601sq m) of grade A space for €26 per square foot (€2.42 per square metre) at the former Amazon European headquarters at Kilmainham Square is indicative of this activity.”

Robust occupier demand and lack of city centre availability will ensure that rents will continue to appreciate through the year from their current level of €4.65 per sq m, according to the report.

Office sales, at €863 million or 85 per cent, continued to dominate the investment market in Q1 2014. Ninety-six per cent of office investment activity is concentrated in Dublin. According to Knight Frank: “The United States accounted for the largest share of both sides of the market, representing 53 per cent of buyers and 62 per cent of sellers who transacted in the first quarter.”