Dublin office rent rises to continue

Prime office rents in Dublin are expected to rise by another 10% in 2014, following a 15% increase last year.

The latest office market review from commercial property specialist, HWBC claims that the additional increase should entice property developers to invest in new sites. Last year, HWBC noted, rental rates for prime office space in Dublin grew by approximately 15%, with total space let up 20%

“Rental levels of prime new developments are likely to reach levels high enough to justify investment in new development,” said HWBC director Paul Scannell. “You can expect cranes and building activity to become a more common sight in Dublin this year after several quiet years.”

In all, prime office vacancy rates in the Dublin market improved last year — down from 18.4% to 17.5%, well down on 2010’s peak of almost 23%. At the upper end of the marketplace, high-quality Grade A offices accounted for 60% of take-up last year, driven by strong demand from international companies setting up or expanding.

Tech giants Facebook and Yahoo counted for over 40% of office take-up in the capital in 2013, with firms from the financial services sector making up 27%.

However, part of the continued optimism for this year rests on the notion that international firms will not be the only ones seeking upmarket office space, with more active domestic demand anticipated too.

“A number of Irish professional service firms are reviewing their space requirements and, with quality office space now in short supply, further capital and rental appreciation are expected this year,” said Mr Scannell.

He said that, as well as increased rents and a continued lowering in vacancy rates, 2014 is likely to see strengthened lease terms for landlords, with rent-free incentives for tenants to fall further as competition for space continues.

Regarding the lower end of the market, however, HWBC noted that just 3% of office space let last year was in Grade C buildings, adding a continued supply overhang remains.

HWBC’s forecasts come a month after its international counterpart, CBRE, said Dublin prime office rents may rise 15% this year.