Demand for office space down 7%

BUSINESSES putting expansion and relocation plans on hold has resulted in a drop in demand for office space in Dublin.

Demand is down 7% in the three months to the end of June compared with the first quarter of the year, according to realtor CB Richard Ellis.

It said sentiment has undoubtedly deteriorated in recent months as a direct consequence of global and domestic economic conditions. However, it said there are no signs of prime rents decreasing in the capital despite lease negotiations becoming very protracted and lease inducements increasing in the three months to the end of June.

As long as letting activity continues to materialise over the coming months, any decline in rental values is likely to be marginal, it added. The report also said a number of the larger lettings were concluded in the suburbs, suggesting some occupiers are considering locating in more cost-effective locations in an effort to contain costs in this uncertain economic climate.

CB Richard Ellis expects office demand to ease going into the second half of the year which will translate into weaker letting activity in 2009.

Director of research at CB Richard Ellis Marie Hunt said: “While take-up in the Dublin office market for 2008 will remain stable, considering the fact that a number of large transactions are being negotiated at present, a number of potential occupiers are now putting expansion and re-location plans on hold and the volume of demand requirements will definitely ease further over the course of the next six months. This in turn will have implications for office letting activity in the capital in 2009.”

Almost three quarters of office take-up in Dublin in the second quarter of this year comprised lettings to business services companies while the public sector accounted for 11% of take-up.