Dublin office space rental costs rise by eight times the European average

The rental cost of office space in Dublin increased by almost eight times the European average in the last year, according to new research by property consultants Savills.

Dublin recorded the fastest growth in net effective rents in Europe at 39.3%, while London City experienced the second fastest at 16.7%. The average increase was 5.1%.

Jobs growth coupled with fewer rent-free incentives from landlords are behind the sharp rise, according to director of research at Savills, Dr John McCartney.

“Service sector jobs growth has led to an upsurge in the demand for office space causing headline rents to rise by 24%.

“But increasing demand has also allowed landlords to row back on rent-free incentives. On average, the rent-free period on a standard office lease has halved over the last year,” said Dr McCartney.

Net effective rents are based on headline rental rates but are also adjusted to account for rent-free concessions which are often used by landlords to entice tenants into buildings. As such, it is regarded as a truer measure of rental prices than headline rates alone.

Dublin was one of only seven markets across Europe in which the average rent-free period fell, with Hamburg, London, Dusseldorf and Paris also seeing a significant reduction in the incentives offered.

Director of office agency at Savills, Roland O’Connell explained that the rise is not unexpected in light of the low starting point of rents in the capital.

“Effective rents fell by more than 50% during the downturn and, in that context, it is not surprising that we are seeing something of a bounce-back,” he said.

“While increasing commercial rents are welcome insofar as they reflect the underlying strength of the economy, we would not want this rate of growth to continue in the long-term.”