ALMOST a quarter of office property in Dublin is sitting vacant and there is little chance of rents increasing in 2011, according to a report by property adviser Jones Lang LaSalle.
A total of 123,298sqm of office space was let in Dublin last year, more than in 2009 but back to the level seen in 1996, according to the research.
The company reckoned prime rents had hit the bottom but said it could be two more years before the sector saw a return to growth.
According to Jones Lang LaSalle, 23pc of office space in Dublin is vacant. The oversupply means tenants have been able to drive tough deals with landlords on low rents, rent holidays and flexible leases.
Lease terms in 2010 were typically for 10 years with a five-year break option and tenants have been able to negotiate rent-free periods of between nine and 15 months.
The overhang in supply could be somewhat overstated, according to the research, because it includes properties that have not been refurbished for decades and are no longer suitable for commercial rental. These account for about 3pc of stock.
The overhang of stock persists despite commercial letting in Dublin getting a boost last year from a ban on upward-only rent reviews introduced in February. The change helped boost letting activity, which rose 69pc in 2010 compared with the low figures for 2009.
The research showed 80pc of transactions were new leases.
With private sector activity at a low, state-controlled tenants signed the two biggest tenancy agreements in 2010.
The biggest rental deals of the year were both in the prime south city area of Dublin 2 and both to government-backed tenants.
The Central Bank signed a 5,276sqm lease and Bord Gais rented 5,213sqm of office space.
Elsewhere, hi-tech multinationals were key tenants with Yahoo, Citrix and Google accounting for 11pc of all space leased in Dublin last year. The three took up leases at the East Point Business Park.