New builds spur looser leases
After three years of a landlord's market, the balance in the Dublin office sector is starting to shift back to tenants.
The shortage of office space in central Dublin has meant that since 2013 rents have almost doubled as vacancy levels plunged. Now though, a new report from CBRE has found this trend is beginning to reverse itself.
Much of the change has come from the slew of office blocks which have been awarded planning permission in the last year, some of which have begun construction.
"With visibility on new stock now becoming increasingly evident, the urgency to secure accommodation and conclude negotiations has eased somewhat. Many occupiers are now demanding more flexible lease terms such as short leases," CBRE said.
"Many technology companies are focussing primarily on sub-letting opportunities on the basis that this allows them greater flexibility such as securing lease terms of less than 10 years duration which is important to them considering the pace that these companies typically expand at.
"In other cases, occupiers are committing to short-term leases for now on the basis that there will be greater availability in the market in the medium term," the broker said.
Work has begun on a string of new office developments in recent months, including Boland's Quay in Grand Canal Dock while planning permission has been awarded for Ireland's tallest office block - The Exo in the Point Village.
Green Reit meanwhile is redeveloping a block at the corner of Dawson Street and Mount Street while UK developer U+I has begun pre-letting The Vertium office block in Dublin 4. Hibernia Reit is also upgrading several of its office properties while IPUT is constructing a new block on Mount Street.
With new projects such as these all being lined up, companies that were anxious about securing more office space have become less willing to pay high rents and sign long leases.
For the moment though, there is little space available in Dublin 2 or 4 immediately and that is pushing rents higher while other firms which must take space have moved to the suburbs and areas like Cherrywood in the west of the city.
CBRE say grade A city centre office rents now stand at €619 per sq m (€57.50 per sq ft). That drops to €269 per sq m in the south suburbs and €161 per sq m in the north suburbs.
The industrial market continues to recover from the crash, with average rents improving to €80 per sq m. Despite that growth though, CBRE say rents are still not high enough to make new development a viable option. That may change soon however if growth continues.
Rohan Holdings has applied for planning permission to build near Dublin Airport and Citywest, while Green Reit has a logistics facility near Dublin Airport.
Retail rents are on the up, with space on Grafton Street now going for €5,700 per sq m. Henry Street and Dundrum Town Centre is at €4,000 per sq m while rents in Blanchardstown Centre stand at €2,750 per sq m.