Office Market:A new report shows that demand for office space was up 37 per cent in 2007 and, with many large firms in the market for new HQs, prospects for 2008 are equally as strong, writes Jack Fagan

The air of uncertainty over the commercial property market does not seem to be impinging on the Dublin office sector. A range of leading companies are actively looking for new accommodation, suggesting that overall take up might well be as high as in 2007.

A new report by Savills HOK and Dr Andrew MacLaren of TCD shows that take up of modern space last year was the highest on record at 297,240sq m (3,199,491sq ft). This marked a 37 per cent increase in demand compared to 2006, according to Roland O'Connell, director of offices at Savills HOK.

He estimates that 73 per cent of the space was in newly completed buildings, virtually doubling from 115,890sq m (1,247,428sq ft) in 2006 to 230,222sq m (2,478,087sq ft) in 2007. There were no fewer than 160 office transactions in 2007, with 16 of them for space greater than 5,000sq m (53,820sq ft) and a further 53 involving more than 1,000sq m (10,764sq ft).

Not surprisingly, locations close to the city centre were most in demand with the inner fringe (Dublin 1, 7 and 8) doing particularly well and accounting for more than 25 per cent of overall take up. Lettings in these areas amounted to 76,111sq m (819,251sq ft) compared to only 15,674sq m (168,713sq ft) in 2006.

Dublin 4 also showed a significant increase in the scale of demand for new office space, more than trebling during the year to 32,011sq m (344,563sq ft) from its historically low level of 9,553sq m (102,827sq ft) during 2006. Dublin 4 seems set to grab an even higher proportion of the business over the next two years with a string of large developments planned for sites in Ballsbridge and at the Burlington Hotel.

Take up last year in the Dublin suburbs came in at 34 per cent of the total, in line with the proportion of citywide stock located there.

Joan Henry, head of research at Savills HOK, calculates that the overall vacancy rate has fallen from 14.3 per cent at the end of 2006 to 13.4 per cent last December. She also estimates that 63 per cent of the vacant space is in newly completed buildings.

The report shows that the trend of geographical variation in vacancy rates continued in 2007. This study recorded a low vacancy rate in city centre prime locations and the opposite in suburban areas. At the end of 2007, vacancy levels were lowest in Dublin 2, 4 and the IFSC, and also in Blackrock-Dún Laoghaire.

Vacancy levels exceeded 10 per cent in the inner fringe of Dublin 1, 7 and 8 where considerable development activity was concentrated in the past two years. Despite strong demand, the vacancy rate in the remaining southern suburbs stood at 15.8 per cent, partially due to the fact that 30,000sq m (322,917sq ft) of new space was completed during the year.

As expected, the vacancy rate in the northern suburbs rose to 27.8 per cent and to 29.5 per cent in the western suburbs. Demand in the western end of the city continues to improve, with vacancy rates dropping most years since 2004 when 40 per cent of the stock was vacant.

Roland O'Connell expects 185,000sq m (1,991,322sq ft) of new space to be completed this year with much increased supply in all the suburbs with the exception of Blackrock and Dún Laoghaire.

The fact that developments in the suburbs would account for 54 per cent of new stock underlined the high level of confidence in the market. Dublin 1, 7 and 8 would also account for 54,000sq m (581,251sq ft) of new space despite the fact that 100,000sq m (1,076,390sq ft) was completed in these areas over the past two years.