Offices: The only way for the Dublin office market - which has hit bottom - is up, according to a new forecast. And Government decentralisation plans will not depress the sector

The Dublin office market has hit bottom and should begin a gradual recovery during 2004 according to a forecast produced by CB Richard Ellis Gunne.

The Government's decentralisation plans should also have a minimal effect on this recovery during the year.

The general economic slowdown has caused concerns in the Dublin market but these are probably misplaced, according to the company's head of research, Ms Marie Hunt.

"Despite the fact that the overall vacancy rate in the Dublin office market is still in the order of 14 per cent, I am confident that the bottom of the cycle was reached in 2003 and that the coming months will see a gradual recovery in the office sector in the capital on the back of improving global and domestic economic conditions," Ms Hunt suggested in a new overview of the office sector in the capital.

She also believes that decentralisation is unlikely to depress the office sector, at least in the short term.

"I am of the opinion that the Government's decentralisation plans are overly ambitious and are unlikely to come on stream in the time frame envisaged. The impact on the Dublin office market is therefore unlikely to be significant in the short to medium term."

She cites a "notable increase" in viewings reported in recent months as indicative of a coming upturn in the sector. The strongest demand is for prime buildings in Dublin city centre, this in spite of the continued "value" available in the city's suburban schemes.

There is a current demand in central Dublin for 200,000 sq m (2,152,780 sq ft) of space, she added.

The sector performed relatively well during 2003 despite the lack of headline deals, Ms Hunt suggested.

Take-up in the Dublin office market was "very healthy", reaching 165,000 sq m (1,776,043 sq ft) during the year on the back of 270 letting transactions, accounting for 56 per cent of all lettings in Dublin.

Away from central Dublin, the south suburbs faired best , accounting for 60 per cent of suburban letting activity.

The west suburbs claimed 30 per cent of office lettings while the north suburbs only represented 10 per cent of the total.

"Looking to the year ahead, it is expected that letting activity will continue to be concentrated primarily in city centre locations, where headline rents for new high-specification office space are likely to stabilise at approximately €485 per sq m (€45 per sq ft) by year-end 2004," Ms Hunt said in her analysis.

Incentives such as rent-free periods will also likely remain a feature of deals in the suburban office market while diminishing in importance for the central Dublin market.