THE sea change in sentiment towards the Dublin office market in less than a year is astonishing.

During the dark days of recession, rents fell back and landlords offered a range of incentives in a desperate attempt to attract tenants.

A number of developers with expensive new buildings lying idle at that time persuaded tenants to move in when they took responsibility for their existing leases. Abbey went one better in 1993 when they let a new, third-generation building at Fenian Street at £8 per square foot rather1than have it lying idle. The same space would command a rent of at least £12 per square foot in todays buoyant market.

The dramatic recovery that has taken place is underlined by a new study which shows that the take-up of space in 1995 totalled 1,110,000 square feet - the highest annual level recorded in the city. The final tally represents a 16 per cent improvement on 1994.

The report by Hamilton Osborne King and the Centre for Urban and Regional Studies at Trinity College, Dublin, finds that only 775,000 square feet of space remained unoccupied at the end of 1995 - of which 224,000 was of third-generation quality. With very little new space being completed in 1995, the report says it is inevitable that the oversupply, which reached 1.5 million square feet in 1993, would be further reduced.

Although the overall vacancy rate fell from 8.6 to 5.5 per cent in 1995, the larger developers are still hoping to pre-let buildings before starting construction work. HOK estimates that of the 540,000 square feet in 16 developments to be completed this year, more than 40 per cent of this space has been pre-let.

HOK says as a result of the continued high rates of economic growth and the expansion of business services, the increase in office completions is "most unlikely" to be sufficient to meet the expected scale of demand. Therefore, vacancy rates will be further reduced. "Prospective occupiers requiring immediate occupation will have an even more limited range of options available to them than was the case in 1995. For those seeking units larger than 15,000 square feet, the difficulties will be particularly severe, especially if a location in Dublin 2 is required - as the space shortages in this area are becoming very acute.

"Inevitably, the increasing intensity of space shortages will create pressure for rental increases during 1996, which will create more favourable conditions for a rise in the amount of speculative development activity.

The report attributes the sharp pick-up in demand for office space on the strong growth in the economy, low interest rates and the optimism about the future of the business services sector. As in previous years, demand was particularly strong during the first half of the year, when more than 663,000 square feet was let. This figure matched the annual take-up for the previous 12 years.

An analysis of the lettings last year shows 48 per cent of them were located in new buildings. This was somewhat lower than the norm in recent years when, typically, between 60 and 75 per-cent of the take-up was newly completed space.

The paucity of available, well-located new buildings is the main reason for such a divergence from the norm.

The report charts the growth in demand for secondhand space. This has moved from around 120,000 square feet per annum in the mid-1980s and 200,000

-square feet in the later years of that decade, to more than 300,000 square feet in 1993 and 1994 to in excess of 580,000 square feet last year, involved buildings located in the traditional office core, with notable clusters to the south of St Stephen's Green, in the Lower Mount Street area and around the Custom House on the north side of the Liffey.

HOK says the market for own-door office units was "very quiescent". There was no significant development activity in this market.