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Grand Canal Square has seen some of the highest office rents in the country, and Goodbody expect them to go higher in the years ahead before eventually flattening out

Grand Canal Square has seen some of the highest office rents in the country, and Goodbody expect them to go higher in the years ahead before eventually flattening out

Grand Canal Square has seen some of the highest office rents in the country, and Goodbody expect them to go higher in the years ahead before eventually flattening out

Office rents will return to boom time levels next year, far quicker than had been expected.

According to a new report from analysts at Goodbody Stockbrokers, the going rate for renting space in a Grade A office block in the top areas of Dublin will cost around €65 per sq ft by 2016.

That rate would equal the high seen in 2007 at the height of the Celtic Tiger. Rents plunged to as little as €27 a sq ft in 2011 but have been climbing steadily since.

At the start of last year, industry experts believed it would be at least 2018 before the market came close to matching its previous high, with some expecting it to be 2020 before it could be matched.

Now though, that rate is likely to come with in the next 18 months.

Unlike seven years ago though, the growth this time is being driven by a drastic shortage of space rather than a credit bubble.

"Investor demand is set to remain strong in 2015," said Goodbody.

"Dublin vacancy rates are 14pc overall [and] only 2pc in the CBD, but miniscule supply is set to drive vacancy rates to sub-10pc by 2016. This will continue to drive up CBD rents strongly in 2015 and 2016 and momentum in the suburbs should also improve given the extremely low prime CBD vacancy.

"The bias for equivalent yields is stable to modestly lower, helped by recent further falls in bond yields," the broker said.

As a result, rents in the CBD will "move modestly through the previous peak in 2016 to €65 sq ft".

"This should be helpful for realising asset management opportunities and development potential for the REITs and may provide a small upwards bias on cashflows and dividends in the next two to three years or so.

Those climbs may be temporary however, and may flatten out once new supply arrives.

However, the steeper upswing trajectory sees us take a conservative stance further out and we anticipate rents tail back 15pc as new supply comes on stream at the end of the decade.

"As such, the €60 sq ft used in our medium term net asset valuation models still looks appropriate, in the middle of this range," the firm added.

Overall, Goodbody remain bullish on the proeprty market for investors and take a particularly favourable view of Hibernia REIT - the real estate investment trust run by Kevin Nowlan.

Goodbody's analysts are also bullish on Green REIT and Kennedy Wilson Europe (KWE).

KWE have previously noted it may pull back from the Irish market but it remains active in Ireland, completing several deals in the past 12 months.

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