The latest quarterly reports from estate agents are generally optimistic about the longterm outlook for the office market, writes JACK FAGAN
THE DUBLIN office market showed further signs of recovery in the three months up to the end of June and with a high volume of space reserved for the coming months overall take-up could reach 92,900sq m (1 million sq ft) by year end.
Quarterly reports published today by four of the five largest estate agents were generally optimistic about the prospects for the market after recording its first positive net take-up for 18 months.
Marian Finnegan, chief economist with DTZ Sherry FitzGerald, said she was “cautiously optimistic” that the worst was over for the Dublin office market, while the director of Savills office division, Roland O’Connell, said it is now clear that the market had bottomed out and with a limited volume of prime space still available there was the prospect of a rental growth in 2011.
After a building frenzy over the past 10 years, there are now only seven office blocks under construction in Dublin with a total floor area of almost 78,0000sq m (838,409sq ft), according to Jones Lang LaSalle. Deirdre Costello of JLL said the supply pipeline has now effectively been turned off and this should help the recovery by reducing the availability of prime buildings. DTZ Sherry FitzGerald reported that only 28,400sq m (305,695sq ft) of space was currently under construction and due to be delivered in 2010. It said building was at its lowest ever level and comprised speculative development in the prime central business district.
Researcher Aoife Brennan of Lisney commented that the overall vacancy rate remained the same at 22.8 per cent, equating to 18.6 per ent in the city centre and almost 30 per cent in the average suburb. “These rates are far in excess of acceptable levels with most commentators agreeing that an overall vacancy rate of about 10 per cent is required for the market to operate at equilibrium,” she said.
Another researcher, Dr Clare Eriksson of JLL, suggested that the primary threat for the office sector would continue to be the high level of sub-leases or assigned space available. This currently constituted 18 per cent of all vacancies or 139,355sq m (1.5 million sq ft) and its reduction would be the main trigger of recovery for the office sector, she said.
The four office reports differed on the level of take up in the three months up to the end of June, estimating that it ranged from 23,003 to 29,500sq m (247,602 to 317,535sq ft). Dr Eriksson said the majority of lettings were driven by companies expanding (59 per cent) while a further 24 per cent were new companies locating to the market. A further 14 per cent were tenants relocating within the city. The most popular deal size was 185 to 371sq m (2,000 to 4,000sq ft). Joan Henry, head of research with Savills, said rents have stabilised and lease terms continue to be favourable towards tenants, with extended rent-free periods and/or break options. Rents for prime city centre offices are in the region of €375 per sq m while rents for secondary office units are beween €215 and €270 per sq m, depending on size, quality and location.
