Lisney’s latest update on the Dublin office market reports that prime headline rents continued to rise in the third quarter of 2014 and are now approaching €440 per sq m (€41 per sq ft).
The agency’s commercial rental indices showed “very notable” increases in city centre rents in the nine months to the end of September, with the index up 26.6 per cent.
As a result, lease terms are moving in favour of the landlord and 10-year leases in prime areas are now being sought. “Tenants might still resist this and request break options,” according to the report, “but as supply dwindles further, tenants will be forced with a decision to locate in the city on longer leases or locate in the suburbs with lease flexibility.”
Take-up in Q3 2014 was 31,000sq m (333,691sq ft), which was down on the first two quarters of the year. But, with take-up for the year now at 131,450sq m (1.415 million sq ft), this is just ahead of the long-term average for this period. Lisney now predicts that total take-up for 2014 should at least equal if not surpass the 171,000sq m (1.84 million sq ft) of last year.
Demand remained focused on the city centre in Q3, with almost two-thirds of letting activity occurring there.
Among the notable lettings in Q3 were: BWG taking 3,140sq m (33,800sq ft) at Beech House in Tallaght; IFDS agreeing terms on 3,060sq m (32,940sq ft) at Bishops Square in Dublin 8; and Amazon taking 3,030sq m (32,615sq ft) at Burlington Plaza in Dublin 4.
The IT sector remained the most active renter in Q3, with 27 per cent of the market. In fact, in the year to date 45.2 per cent of take-up was from the IT sector at 57,200sq m (615,695sq ft). “At this level,” according to Lisney, “IT already exceeds its annual figures for the last 10 years with the exception of 2011.”
Financial services was next busiest taking 21 per cent of all office accommodation in Q3 – up 13 per cent in the year to date. Lisney expects the financial services sector to increase its take-up next year along with the State, which is “currently negotiating on two north innercity locations, namely Spencer Dock and Kings Building”.
The vacancy rate for the overall Dublin market was 16.5 per cent at the end of September, but for the city centre it stood at 14 per cent with just over 311,000sq m (3.347 million sq ft) of space available.
“No new office buildings are due for completion this year,” says Lisney “and possibly only one or two due for completion in 2015, such as the former veterinary site in Ballsbridge and the former Canada House site on St Stephen’s Green – but these may be pushed out to 2016.
"There are a limited number of other schemes in the pipeline with possible completion dates in 2016/2017. These include a docklands mixed-use site being developed jointly by Oaktree and Bennett Construction and a Burlington Road site owned by a consortium including Johnny Ronan and Paddy McKillen. "
