Tuesday 20 March 2018

Some office rents fall but sectors increase

Donal Buckley

Contrasting views of Dublin office rents come this week from different agents. CB Richard Ellis report that prime headline rents are stabilising at around the €296 per sqm -- a drop of around 8pc on the end 2011 prime rent averages.

In contrast Roland O'Connell of Savills points to recent negotiation activity which indicates that rents for some sub-sectors of the market are on the increase.

He also warns that a shortage of suitable new offices may undermine the competitiveness of Dublin offices in attracting overseas employers.

He points to two recent small deals where rents were agreed at €344 per sqm and he goes on to say that an overseas bank may have to pay as much €377 per sqm to get the space it has been seeking in Dublin. (See his article on page 5).

But he also agrees with CBRE that average prime rents are around €300 per sqm.

Both also agree on the continuing demand and point to possible increased supply coming from shrinking financial services companies.

Willie Dowling of CBRE says: "The office sector is continuing to perform well with an encouraging level of new and unfulfilled requirements for accommodation in the capital.

"Occupiers including the Central Bank, BNY Mellon, Capita, Goodbody Stockbrokers, Davy, Jazz Pharmaceuticals, AA, Facebook, Wells Fargo and Yelp are currently looking for office accommodation.

"We expect to see continued activity in the office sector over the coming months, fuelled to a large extent by new foreign direct investment announcements and opportunistic lease re-gearing," Mr Dowling adds.

"It remains to be seen what additional accommodation will come on stream as a result of further rationalisation in the banking and insurance sectors.

"However, it is clear that the overall rate of vacancy in the capital is unlikely to decline to any significant degree despite the underlying level of letting activity being achieved," he says.

CBRE has recorded a number of recent lettings including 2,962sqm to Google in Block P at East Point where Arvato has taken an additional 3,767sqm in Blocks J and K.

In the north suburbs, Mylan have leased 1,996sqm in Newenham Court at Northern Cross. In the city centre, Blackrock Asset Management have agreed to sublet 641sqm in Grand Mill Quay on Barrow Street, Dublin 4.

BSKYB are in negotiations to lease 3,500sqm in Burlington Plaza on Burlington Road where 13,000sqm of accommodation remains available including suites from 1,200sqm.

In the south suburbs rents average €172per sqm while those in the North suburbs average €151 per sq m and those in the west suburbs average €134.50 per sqm.

The half built Sentinel Tower in Sandyford is reputedly sold for around €900,000. Nearby, RGA Insurance has taken 538sqm in Central Park.

Most recent Dublin lettings at present comprise 10 year lettings with breaks at year five although in cases where tenants are willing to forego a break option they are in a position to negotiate a more favourable rental deal.

Outside of Dublin, Paypal have confirmed their decision to lease accommodation in Dundalk while Hewlett Packard has a requirement for 9,290 sqm in Galway.

Meanwhile the investment market has seen four office blocks at AIB Bankcentre being offered for sale with an €85m guide price.

Indo Property

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