Dublin office rents hit €40 a foot with no top in sight
Prime rents in the top areas of Dublin are now at over €40 per sq ft, as the Dublin market shows no sign of easing.
According to CBRE, rents in Dublin 2 and 4 increased by 15pc to €430.50 per square metre (€40 per sq ft) during Q2 2014 and are expected to rise further over the course of this year as supply shortages in prime locations become even more acute until new supply comes on stream.
The property consultants also expect rents in other parts of Dublin to experience some upward pressure over the course of the coming months following the pattern that has been firmly established in south Dublin over the last 12 months.
Vacancy rates in all districts of Dublin fell again in Q2 2014. The overall office vacancy rate in Dublin at the end of Q2 was 13.57pc, down slightly from 13.89pc last quarter.
The vacancy rate of Grade A accommodation in Dublin 2 and 4 at the end of the quarter was only 3pc which explains why rents are now growing at such a rapid pace in this district, say CBRE.
Nearly 35,000 sq m of office space were leased in Dublin during the second quarter of this year, bringing the level of leased space in the year to date to almost 100,000 sq m.
Statistics from CBRE show that 34,518 sq m was let of office leasing transactions were signed in the capital beetween April and June, to the point that 97,500 sq m has now been let in 2014.
There have now been 100 transactions in the year to date, and CBRE believe that an annual outturn that exceeds Dublin's annual average volume of leasing activity of some 160,000 sq m per annum is now possible. This is because of the underlying volume of transactions in negotiations and the fact that there was almost 21,000 sq m of office accommodation reserved at the end of Q2 2014.
Perhaps unsurprisingly, tenants in the IT sector accounted for a quarter of all transactions. More unusually though, public sector tenants accounted for 21pc of Q2 take-up. Meanwhile, business services tenants accounted for a further 21pc of leasing activity in Dublin in the quarter. Four of the ten largest lettings completed in the Dublin market in Q2 were expansions, three were new entrants while three were relocations.
CBRE Ireland head of research Marie Hunt commented: "A number of attractive Dublin office investment opportunities are due to be launched for sale in the second half of 2014 and are likely to be keenly bid considering the underlying strength of occupier activity as evidenced by take-up in the first half of 2014 and rental growth prospects in this sector."
"Prime office yields in Dublin at the end of Q2 2014 stood at 5pc having stabilised during the quarter following a period of very strong yield compression in the previous 12 month period. Prime office yields in Dublin remain very competitive relative to those prevailing elsewhere in Europe," she added.
The city centre accounted for 73pc of take-up in Dublin. There were 27 individual lettings signed in Dublin city centre in the three month period bringing the total number of Dublin transactions to 69.