Modest but encouraging growth in demand for affordable Dublin office rental
The latest MarketView from property consultants CB Richard Ellis (CBRE) has shown an overall 66% increase in the take-up for the first half of 2011 versus this time last year. The quarterly trend is also positive, with April-June up 36% versus January-March.
It is clear also, however, that the upturn in the capital is primarily in smaller business units. Take-up in Q2 2011 comprised 51 individual lettings, 29 of which were smaller than 465m² in size. A further 21 lettings were between 465m² and 1,858m².
The largest letting of the quarter occurred at Belfield Office Campus in Clonskeagh, Dublin 4, where Paddy Power signed a lease for 11,107m², the second letting to exceed 10,000m² in 2011.
The CBRE analysts also saw a positive trend among city centre properties. Those larger city centre offices still available for letting are secondary buildings.
Also worthy of note is the fact that the key headline vacancy rate for Dublin offices fell marginally to 22.8% in Q2 2011, with more than 825,900m² of vacant stock in the Dublin market at the end of the quarter. The report’s authors suggest that there are a number of new office developments in the pipeline.
The report’s authors also note: “Our research indicates that 72% of Dublin’s vacant stock at the end of Q2 2011 was deemed to be Grade A stock, but almost half (48%) of this Grade A vacant stock is located outside of the city centre and spread throughout the suburban markets.
“Given the attractiveness of Dublin to international occupiers setting up European headquarters or flagship operations within the eurozone, it is important to note that as of the end of Q2 there are only 17 properties in the Dublin market with enough accomodations to house a tenant requiring 7,000 square metres or more and two of these properties are secondary buildings.”
The upward trend in terms of take-up may also be influenced by a mild reduction in rents being charged for prime Dublin office space.
Largely due to intense competition from tenants, prime headline rents for Dublin offices came under renewed pressure in Q2 2011, falling to €323 per square metre from €345 per sqm.
This quarterly decline of just over 6% means that prime headline rents in the Irish capital have fallen 52% from their peak in 2007.
The CBRE report authors add: “In light of continued uncertainty with regards to proposed Government legislation regarding rent review mechanisms in existing leases, we believe prime office yields have increased to 7.5%. There was only one investment transaction completed in Q2 2011, a city centre office building purchased by one of its tenants.”
The greater take-up of smaller office units may also be explained by the smaller scale companies taking up more office space. Encouragingly, many of these tend to be indigenous Irish companies.
Consumer services and leisure tenants accounted for 36% of take-up in Dublin during Q2 2011, the largest single proportion in that period. A further 24% was accounted for by the computers/hi-tech sector while business services and financial services accounted for 17% and 10%, respectively.
Manufacturing, industrial and energy tenants accounted for 8% of quarterly take-up. Public sector bodies and professional services tenants accounted for 5% of the take-up from April to June.
Meanwhile, for companies looking to provide accommodation for relocating executives, Dublin prime residential rents are now the equivalent of 50% of comparable London property rental price.
This finding in a new British-focused study by Savills UK is a positive for the Irish economy in terms of its competitive edge.
Ronan O’Driscoll, director of residential at Savills Ireland, said: “Rents in Ireland are stable with only a very minor increase in the first half of the year. Compared with London, like-for-like prime Dublin residential rents are at about 50% of that if its close neighbour.”
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