Calculated every two months and based on recent transaction data, rents have increased to €28.50 per square foot, from €27.50 in January, driven by demand from tenants such as Facebook, Ebay, and Google that are attracted to Ireland’s low corporation tax rate of 12.5%.
At the same time, yields on so- called prime offices have fallen to 6.5%, the lowest since their 5.5% level before the collapse of Lehman Brothers in the third quarter of 2008, as overseas investors competed for the best real estate in a bet that Ireland has put the worst of its economic problems behind it.
At the last peak of the market in mid-2007, prime office rents were €62.50 per square foot before falling to €27.50 last year, and yields were 3.75% before hitting a peak of 7.5% in 2008, CBRE said.
“It is a top slither of the market but it’s another indicator showing economic improvement in Ireland,” said Marie Hunt an executive director at CBRE in Ireland. “Office rents should hit €30 per square foot by the middle of this year.”
Ebay said this month it would hire 450 people in Ireland, almost a year after hiring 1,000 workers at its payment service PayPal.
Overseas investor interest has come from North American investors and RREEF, the property arm of Deutsche Bank, JP Morgan Asset Management, and the real estate arm of French insurer Axa all told Reuters they have looked at buying in Ireland.
Overseas interest is also picking up as banks, including Nama, ramp up loan sales backed by real estate.
European Commission president Jose Manuel Barroso said on Thursday that tough fiscal decisions meant Ireland was “turning the corner” though patchy economic data that includes falling retail sales points to a slow and uneven recovery.
Outside the best Dublin locations, office rents are flat-lining with a vacancy rate of about 20%, a trend mirrored in the housing market. House prices fell 0.6% month-on-month across Ireland in January, though they rose 0.5% in Dublin.