Recovery in the Dublin office market is now “firmly entrenched”, according to the latest Irish office market review from agent DTZ Sherry FitzGerald.
Take-up in the capital during 2013 reached 119,300sq m while 22,500sq m of office space was under construction, said Marian Finnegan, its chief economist.
“2013 saw cranes re-emerge on the Dublin skyline with two speculative developments commencing construction in the final quarter. This includes the redevelopment of the former Canada House office, a corner site at 65-68 St Stephen’s Green, Dublin 2, comprising approximately 6,900sq m. Furthermore, ground has broken on the former 2.02-acre vet college site in Ballsbridge, Dublin 4,” said Finnegan.
Rising demand left the overall vacancy rate at 19.5 per cent at the end of 2013, down from 21.5 per cent a year earlier, with 654,600sq m of space still available. Supply levels continued to recede in the Dublin CBD region resulting in upward pressure on rents.
“Over €700 million worth of office assets transacted in Dublin during 2013 while occupier activity increased by 10 per cent during the same period,” said Finnegan. “It is important to note that the amount of space signed and awaiting occupation stood at approximately 64,000sq m, with a further 65,000sq m under offer at the end of 2013. The level of underlying demand supports a strengthening of take-up in 2014.”
The review also noted there were a number of high-profile companies with requirements for space including software giant Microsoft, Citibank, Groupon, Accenture, Brown Brothers Harriman, and Riot Games.
Office markets outside the capital had a mixed year. The Cork office market enjoyed strong levels of demand in 2013 as the quantum of take-up rose on an annual basis by 65 per cent, recording robust transaction levels of 41,100sq m – the largest annual take-up level in recent years. The level of net take-up, which measures the change in occupied space, increased significantly during the year to stand at 25,050sq m. Some 11,150sq m of accommodation had completed construction in the final quarter of 2013. The vacancy rate for the Cork office market at the end of December stood at 23 per cent, down from about 26 per cent at the end of 2012.
Performance in the Limerick market lagged and the Galway market experienced subdued activity during 2013. Availability levels remain high across the regional centres, particularly in Cork and Limerick. Vacancy levels in the Galway office market remain the lowest of all regions.
On a positive note, about €780 million worth of office assets were transacted in Ireland in 2013.
“A trend that continues to prevail across all the office centres is a shortage of good-quality large office floor plates, particularly in city-centre locations. An occupier with a requirement for Grade A city-centre accommodation greater than 5,000sq m is limited to just two buildings across all regional centres,” said Finnegan.
As supply levels in Dublin’s CBD recede, in particular Grade A space, prime rents are coming under pressure. Headline rents for third-generation prime accommodation were stable at about €350 per sq m at the end of December. For the year as a whole, headline rents in the capital rose by 12 per cent. That said, there have been some transactions within the CBD at headline rents between €334 per sq m to €376 per sq m. However, these would appear to be niche transactions and are not an indicator of a wider trend in the market.