Dublin office market records strongest take-up since 2008
The first six months of 2017 saw the strongest levels of take-up in the Dublin office market in almost a decade according to the latest quarterly report on the sector from Cushman & Wakefield.
But while the 128,050 sq m of office space taken up in the six months to June outstripped the figure recorded for the same period in 2016 by 1.2pc, this year's performance was accounted for the most part by activity in the first quarter. The latest quarter, by contrast, saw a relatively-modest 33,000 sq m of office space taken - or just half the amount taken up in the first quarter last year.
The Dublin office market did see a significant volume of space either signed or pre-let at quarter end, totalling 186,450 sq m, leading to expectations of a very strong performing H2 2017.
Leasing activity in the first six months of this year was bolstered by a number of large deals in excess of 5,000 sq m, mostly comprising office buildings which completed construction and had been pre-let for some time. These include the new Central Bank headquarters at North Wall Quay, Dublin 1, which measures 18,400 sq m; a new build at 14-18 Hatch Street/Earlsfort Terrace, Dublin 2, which measures 11,150 sq m, occupied by Arthur Cox; and LinkedIn's new EMEA headquarters at Wilton Plaza, Dublin 2, also measuring 11,150 sq m. These deals played a large part in increasing the average sized deal to 1,076 sq m - a full 6pc higher than the corresponding period in 2016.
The largest occupations in the second quarter meanwhile included Shire Pharmaceuticals Ireland taking up two blocks at Miesian Plaza on Lower Baggot Street, measuring a combined 7,050 sq m, and recruiting firm, Global Force, who took 3,400 sq m at Block 19, Park West Business Park, in the suburbs.
Among the large office floor-plates due to be taken up in the latter half of 2017 are the almost 16,000 sq m pre-let to Amazon at the Vertium building, Dublin 4; 12,000 sq m signed by AIB at Central Park, Leopardstown; and 9,400 sq m to be occupied by the Department of Health at Miesian Plaza, Dublin 2.
Following three consecutive years whereby the quantity of office space taken up in the city's suburbs was greater than the CBD, occupier preference has now moved back towards prime city centre space. Cushman & Wakefield says this is largely due to new space either being constructed or materialising through refurbishments in the CBD, accommodating ongoing inward FDI. 47pc of all take up in the CBD in the first half of this year consisted of newly-developed and completed office space, compared to zero over the past five years. An estimated 85,950 sq m of space was taken up in the CBD in the six months to June 2017, the highest level of take up for the period in a decade.
Despite an improvement over the past number of months, availability of the best quality Grade A1 space in the CBD, particularly to meet large-scale requirements, remains tight. Net availability for Grade A1 space stood at 14,350 sq m in quarter two, with a net vacancy rate of 2.5pc. This comprises just one building in excess of 5,000 sq m in size, while there was no Grade A1 building greater than 10,000 sq m in size available for letting in the CBD.
An analysis of the CBD submarkets reveals that the IFSC - North Docks area was the most supply constrained at the end of June, with a net vacancy rate of 1.5pc. Furthermore, with just 2,950 sq m of Grade A net available at the IFSC - North Docks, the net vacancy rate for Grade A floorplates stood at 1.2pc. This was followed by the Ballsbridge area, which had a net Grade A vacancy rate of 1.7pc.
A comparison by Cushman & Wakefield of the profile of space available at the mid-point of 2017 versus the height of the market reveals that currently there is less availability of larger sized office space, and over double the number of available smaller sized offices, sub 1,000 sq m in size. The average size of an office available in quarter two measured 1,183 sq m, compared with 2,066 sq m in the same period in 2007.
With six new schemes commencing during the second quarter, a total of 334,850 sq m of space is now under construction in the Dublin office market, across 37 schemes, all to be delivered by 2019. This represents a 7pc uplift on the previous quarter and a 14pc uplift year on year. 27pc of the space under construction is pre-let, with a further 11pc reserved. Cushman & Wakefield expect that as the year progresses, pre-lets will increase further and approach 50pc. Of the space due for delivery before year end 2017 alone, 42pc is either pre-let or reserved.
79pc, or 264,500 sq m of the space under construction is concentrated in the CBD area.