No sign of a slowdown as office rates surge by 10pc
OFFICE rents surged 10pc in the first three months of this year, as the commercial property market showed no signs of slowing down in 2014.
According to a report from the Society of Chartered Surveyors of Ireland, demand from overseas multinationals have pushed up rents in the top areas of Dublin, as what supply there is in the market comes under severe pressure.
The report shows that prime office rents in Dublin are now priced between €350-€377 per sqm. That is already in line with forecasts from several market watchers for the end of this year.
The Dublin vacancy rate was around 9pc. In general, anything below 8pc is considered a shortage.
SCSI head of commercial agency Eamonn Maguire said new construction was essential for the office market to be able to grow.
"While the turnaround is most welcome it is paramount that we address supply issues. At the moment we are seeing the effects of the lack of construction over the past four to five years and this together with increased international investment and demand, is leading to a tightening of supply for modern office space in the major cities," he said.
"This shortage is leading to increased rents and a declining vacancy rate and measures must be put in place to ensure that this does not threaten our competitiveness in terms of attracting foreign direct investment.
"The current demand is largely driven by multi-national organisations in the Telecoms, Media and Technology sectors and these increasingly mobile firms cannot afford to wait 24 months for projects to get off the ground," he added.
The trend of shrinking availability and increasing rents shows no sign of abating.
Two thirds of chartered surveyors said they expected the supply of prime office space in Dublin to decrease over the next 12 months while three out of four said they expected rents for these properties to rise.
In the retail market, prime rents continued to slide last year but are now beginning to stabilise, while industrial rents are now bottoming out at close to €61 per sqm.
Investment in the commercial property market accelerated to some €2bn in 2013, three times higher than 2012 and that pace of investment looks set to continue in 2014. According to the report, over half of investment spend in 2013 came from international investors with strong demand from the US, Europe and Asia.