Rental rates are growing at a rapid pace in parts of the capital with increases of as much as 15% in the second quarter of the year in the most sought-after areas.
According to commercial property consultants CBRE, 41 transactions were completed in the Dublin office market in the second quarter, bringing the total for the first half of the year to 100.
Similar strong demand is anticipated in the coming months, according to CBRE Ireland executive director and head of research Marie Hunt.
“A number of attractive Dublin office investment opportunities are due to be launched for sale in the second half of 2014 and are likely to be keenly bid considering the underlying strength of occupier activity, as evidenced by take-up in the first half of 2014 and rental growth prospects in this sector,” said Ms Hunt.
CBRE are predicting that supply shortages in prime locations such as the D2 and D4 areas of the capital will become more acute over the remainder of the year, resulting in further rent increases.
Vacancy rates in Dublin fell marginally in the last three months from 13.89% to 13.57%.
Highly sought-after Grade A accommodation at the end of the quarter was just 3% though, which explains the soaring rental rates.
The same D2/D4 district accounted for more than 40% of the take-up in the entire city; and 60% of city centre take-up.
Meanwhile, Davy stockbrokers revealed yesterday that a total of €1.8bn was invested in the commercial real estate market nationwide in the first half of the year — 70% of which was accounted for by capital invested in the Dublin office market.
The first six months of the year saw a continuation of the “rapid market recovery” witnessed before the turn of the year and record levels of activity in the sector, according to Davy.
Nama was behind the bulk of office sales to date in 2014, having closed large scale deals including the Platinum Portfolio for €165m and the €173m Redwood Portfolio which included the sale of Observatory Building in Dublin city centre at the beginning of the month.
According to Davy, Nama is expected to remain one of the main providers of office space in the coming months which should help alleviate some of the pressure in the market.