Strong growth in office-based employment is driving the demand for business space in Dublin, according to property consultants, according to estate agents Savills Ireland.
In its latest commentary on the capital’s commercial property market, Savills reported that 57,000 square metres of office lettings were signed in the first three months of this year - a 32 per cent jump on the same period last year.
Director of research at Savills Ireland John McCartney said the continued expansion of Ireland’s service economy, particularly in ICT and professional services, was driving demand.
“Ireland has staged a remarkable labour market recovery with over 63,000 additional jobs created in the last two years. Half of these have been in Dublin and, of these, approximately half have been in ICT and professional services.”
“These trends are reflected in the pattern of office take-up, with ICT and professional services firms accounting for almost 55 per cent of Dublin lettings in Q1 2014.”
Dr McCartney said another noticeable dynamic in the Dublin market is that the “churn” arising from relocations within the market is increasingly being replaced by net additional demand from new entrants and expansions.
“Gross letting activity held up well during Ireland’s economic crisis. However much of this was driven by ‘churn’ as occupiers relocated within the market to secure better buildings at lower rents. However, with the labour market now recovering, demand is increasingly being driven by new entrants and businesses looking to expand”.
According to Savills, this is causing office vacancy rates to fall sharply.
Gross lettings of 184,000 square metres over the last 12 months have translated into net absorption of 128,000 square metres, pushing the vacancy rate down to 14.5 per cent from 18.2 per cent this time last year.
However, Roland O’Connell, director of offices at Savills, cautioned that thiswas leading to a decline in the quality of the office stock that remains available for letting.
“As new entrants and relocating occupiers have gravitated towards the better space that is available in the market, the quality of Dublin’s vacant stock has deteriorated. Particularly for occupiers seeking large parcels of top-specification space in the prime business locations, choice is becoming increasingly restricted.”
