Despite ongoing difficulties in the funding environment, supply in Dublin's office market will be delivered in a "measured fashion" over the coming years, downplaying fears of oversupply by 2018, a survey from Davy Research shows.

Respondents to Davy’s survey show that the debt markets are essentially shut for speculative office development, with 88 per cent suggesting that less than half of the 6.6m square feet of potential supply has funding today.

“The appetite for lending against speculative development is almost non-existent,” Davy said, noting that where speculative development debt is advanced, “its terms and costs resemble mezzanine finance rather than what would be considered senior debt.”

Given that the vacancy rate has fallen below 10 per cent for the first time in 15 years, it could make development attractive, but as the report notes, there is a strong pipeline of future projects.

But, Davy said that fears of an oversupply of new office stock by end-2018, a view which has been espoused by those in the sector in recent months , “ now appear overdone”.

According to the survey, 60 per cent saw the risk of oversupply at less than 25 per cent. CBRE estimates that about 5.8 years of supply could come to market by end-2018.

“However, participants noted that larger schemes are likely to be delivered on a phased basis and that funding acts as a constraint on activity,” Davy said.

On rents, respondents said it was unlikely that they will exceed €70 per square foot.