Office rents in Dublin now 90pc higher than 2013 and set to continue climbing
Office rents in Dublin will continue to rise sharply this year, albeit at a much slower pace than in 2015, the Society of Chartered Surveyors Ireland has claimed.
In its review of 2015 and outlook for the year ahead, the SCSI said rents had risen by 24pc for top level Dublin offices in the past 12 months.
That is a phenomenal rate, but the speed of the increase will slow down sharply in 2016.
The SCSI forecast rents to climb 12pc over the course of 2016. While that is still a big increase, it does signal the beginning of an easing in Dublin office market. Most experts believe rents will start to stabilise in Dublin from next year once new supply finally starts to become available.
Dublin office rents averaged €52 per sq ft (€561 per sq m) at the end of 2015.
Outside Dublin, office rents are much lower but the surveyors believe they are increasing at around 6pc per annum. In Cork, that rate improves to 8pc.
On the retail side of the market, rents in Grafton Street and Henry Street surged 17pc last year and are expected to continue to move higher in 2016.
Brian Meldon, SCSI commercial agency professional group chair, said: "While some respondents are anticipating an increase in supply in 2017, no new office space has been delivered to the Dublin market for the last five years and as a result demand continues to surpass supply.
"As a result, there are ongoing concerns about Dublin's ability to continue to attract service sector Foreign Direct Investment in the absence of appropriate office space."
The SCSI forecasts came as a report from property agent DTZ Sherry Fitzgerald showed that occupation levels in the Dublin office market are at the highest level since 2007.
Just under 300,000 sq m of office accommodation was taken up across the four regional office markets during the year; crucially, occupier demand was running 25pc higher relative to the 10-year average.
DTZ estimate average rents for Dublin offices to have been marginally higher than the SCSI at €592 per sq m. That is 90pc higher than the bottom of the market in 2013.
DTZ Sherry Fitzgerald chief economist Marian Finnegan said the rental market would continue to trend up as long as the shortage of suitable space remained.
"The strength of recovery in the Irish labour market is reflected in a broad-based recovery in the Irish office market, with strong take up activity recorded in all of the regional office markets," she said.
"As such supply side shortages are emerging in key markets, most notably in the Central Business District of Dublin and the Galway office market," she added.