Dublin office take up to rises again
More than 108,000 sq m (1.16m sq ft) of office space in Dublin was taken up in the first six months of this year, say HWBC.
That was well up on the 95,200 sq m for the same period last year and take up for all of 2015 should be close to 200,000 sq m, the firm says. That would be well ahead of the long term average of 165,000 sq m.
The office market in Dublin has been the star performer in the recovery of the property sector of the last 3 years and this is particularly evident in the CBD where prime rents rose by 30pc 2014 and expected to rise by over 20pc in 2015. Pressure on prime rents has been driven by reducing Grade A supply which is now at acute levels, particularly for requirements over 2,000 sq m.
Economic performance is a principle driver of demand for office space and the Irish economy is the fastest growing in the EU. Much of this growth is in the services sector which is positive for the office sector in Dublin as is the falling unemployment rate, which is now below 10pc with the Government forecasting full employment in the economy to be reached by 2018/19.
No new office space has been delivered to the market since 2011 and only a limited number of new schemes have started to date.
The firm notes however that there are a number of refurbishment projects underway to mainly cater for smaller requirements, recycling Grade C stock with smaller floor plates.
"Despite much comment over the last 18 months of serious supply issues emerging in the CBD, there has been little new construction to date to satisfy goring demand. We are of the view that new speculative projects will be limited in this cycle for a number of reasons."
"Generally the banks are not funding schemes on commercially viable terms and there are only a limited numbers of players in a position to fund spec offices such as Reits, Funds and high net worth individuals. The last construction cycle was dominated by indigenous builders funded by the banks, which will not be a feature going forward. In addition there are industry constraints due to construction firm failures during the recession and skills shortage from the severe contraction of the construction sector, which will take time to correct," said HWBC.
The overall market vacancy rate is now 10.15pc and is expected to keep falling until new supply comes to market in 2017/18. The vacancy rate for CBD is much tighter at 5% with much of the vacant space obsolete and virtually unlettable without significant investment. The vacancy rate for Grade A stock in Dublin 2 is now below 3pc and the lack of 'big box' buildings to let will impact take up levels over the next two years," HWBC added.