Multinational companies, especially those in the technology sector are expected to be the main drivers of the Dublin office market in 2012, building on the mom- entum seen in 2011 when they accounted for half of the office take-up.
This is the view of Jones Lang LaSalle in their outlook for the Dublin market. The agents attribute this demand to the attractiveness of Ireland for low corporation tax, its young educated workforce, choice of property, flexible lease terms, low rental levels and increased incentives which together combine to create a competitive business environment.
Such foreign companies engaged in 148 transactions in 2011 helping to create 13,000 new jobs.
However, JLLS research analyst Hannah Dwyer raises questions about the capacity of the Dublin market to cater for future demand.
The year-end vacancy level reduced to 707,000sqm or 19.5pc of total stock and she points to the possibility that 46,500sqm of office accommodation may come to the market this year due to break options, lease expiries and relocations.
This includes buildings such as the 20,494sqm Bank of Ireland on Lower Baggot Street, as well as the 7,757sqm EBS at Burlington Road. Nevertheless, she points out, a number of the buildings on the market are likely to remain vacant until modernised.
When it is taken into account that as much as 111,480sqm of vacant stock was built before 1990 and is unlikely to be let pending renewal, this reduces the overall Dublin office vacancy level to 16.4pc
With tenants favouring new, well-located properties, Ms Dwyer expects an increase in the number of buildings being refurbished in the short-term in order to compete with better quality buildings.
With about 29,263 sqm of space already reserved for the first quarter of this year and with current market trends, she believes that rents have reached the bottom.
Looking forward to 2020 Jones Lang expects more demanding challenges for landlords and developers as new occupiers will require greater efficiencies and sustainability.
Landlords will need to assess buildings to ascertain if pre-1990 offices can be converted to meet 2020 requirements and still prove economically viable.
"Will developers be prepared to put up extra up-front costs and will the occupier be willing to pay extra?" she asks.
These dilemmas will become all the more difficult considering that the period of leases is being slashed.