Office rents increased by 40pc in the last year
THE real rents being paid for office space in Dublin grew the fastest across 21 European markets over the last two years, a new study found.
Property consultants Savills said "net effective rents" have increased by almost 40pc in the capital over the last 12 months, compared with an average of 5.1pc across Europe.
Roland O'Connell, a director at Savills, said prices are recovering from a very low base.
"Effective rents fell by more than 50pc during the downturn and, in that context, it is not surprising that we are seeing something of a bounce-back," he said.
"While increasing commercial rents are welcome insofar as they reflect the underlying strength of the economy, we would not want to see this rate of growth continue in the long term. Rents can account for a significant part of the occupier cost base and they have knock-on implications for Ireland's competitiveness and its attractiveness as a business location."
Director of research, Dr John McCartney, said net effective rents comprise of standard 'headline' rents overstating the 'true' market rent as they are partially offset by the rent-free periods that landlords typically offer to attract tenants.
Dr McCartney said deadline rents and rent-free periods have moved in opposite directions over the last year, causing effective office rents in Dublin to rise quite sharply.
"Service sector jobs growth has led to an upsurge in the demand for office space causing headline rents to rise by 24pc," he continued.
"But increasing demand has also allowed landlords to row back on rent-free incentives. On average, the rent-free period on a standard office lease has halved over the last year."
The report found Dublin was one of only seven markets across Europe in which the average rent-free period fell, with London, Dusseldorf and Paris also seeing a tightening of the incentives on offer.