New builds ‘will stop office rent rise’

The Construction Industry Federation has said “real and meaningful” construction activity is needed in the Dublin commercial sector to stop a lack of supply from pushing rents above peak Celtic Tiger levels.

With 56,000sq m of office development and refurbishment projects under way in Dublin’s central business district, Davy Stockbrokers yesterday said it expected office rents to continue to inflate over the next two years and exceed their 2007 peak.

There are predictions that companies looking for “Grade A” developments in Dublin 2 and 4 postcodes can expect to encounter double digit inflation.

The CIF said, over the next 24 months at least, the lack of new development coming on stream would create a supply and demand imbalance.

“It is therefore imperative that real, meaningful, construction gets underway to correct this imbalance,” said Roisín Bailey of CIF, in a blog on the federation’s website.

“The provision of modern, efficient office and commercial buildings is an important tool in attracting foreign direct investment.”

She said the development of the new buildings would also create employment for the construction industry.

“The knock on effect would be felt in the wider economy. Smaller rent rises, more jobs created both in construction and in the economy over all.”

However, according to the CIF, barriers to such activity need to be addressed.

It says there is a lack of finance available with banks only willing to lend 60% of the funding to finance a project.

“It is therefore necessary to source the final 40% elsewhere, often at high interest rates sometimes making the final cost unsustainable,” said Ms Bailey.

“Planning can be a long and difficult process. Areas such as Dublin Docklands have been designated Strategic Development Zones to make the planning process a more straight forward one. Thought should be given to extending the SDZ to reduce the red tape involved in the planning process.”