Dublin office rents to grow strongly as Brexit boosts demand

Office rents will grow strongly in Dublin this year despite a major acceleration in completions of new projects, property consultancy HWBC has said.

It is predicting an 8 per cent rise in prime office rents to €65 per square foot.

The consultancy said there is little chance of an oversupply, despite the large number of new developments scheduled to come on stream in 2017 as timid banks ration financing for some developers, who are taking a more sensible approach to pre-lets than during previous construction bursts.

In its latest Office Market Review, HWBC said Dublin completions are expected to rise 184 per cent in 2017, after a 10-fold jump last year. A total of 2.3 million square feet of extra space will become available this year.

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However, about 55 per cent of this is already pre-let.

Strong pipeline

HWBC said there is also a “strong pipeline” of potential new companies moving here arising from Brexit, which would include banks looking to retain a European Union base.

Many of these will be “companies moving 100 or 200 staff, rather than moving thousands, but it will still have a very positive impact given the supply constraints in the Dublin market”, HWBC managing director Tony Waters said.

"Whilst rental growth in the office market in Dublin has eased from the double digit levels of 2012 to 2015, prime office rents rose a very respectable 9 per cent and will grow by a similar level in 2017, helped by the Brexit demand that is clearly now coming through – with plans to expand in Dublin by investment banks like Barclays and Credit Suisse emerging in recent days."

Suburban areas

Rents have doubled over the last five years, while vacancy rates are also down to a third of their 2010 trough level.

Rents are also rising fast in suburban areas such as Leopardstown and Sandyford, where office space often costs about half that of a city centre location, are rising at even faster rate. HWBC said prime suburban rents rose 11 per cent last year to €28 per square foot.

Among the biggest deals in 2016 were Amazon taking 171,000sq ft in Burlington Road, Grant Thornton's 104,000sq ft on City Quay and ESB's 83,000sq ft on East Wall.

Meanwhile, HWBC said a car-parking space in the city centre now fetches an average rent of €4,000 per annum, and about €1,500 in a suburban location.