Dublin first in Europe for rental growth
Research suggests average annual growth in office rents of 6.3% over next five years
Commercial Property Editor
Dublin is ranked first in Europe for likely rental growth in the office and industrial markets between now and 2018, according to the latest research forecasts by international estate agents JLL.
The study suggests that there will be an average annual growth in Dublin office rents of 6.3 per cent over the next five years. Madrid is tipped to follow Dublin with annual increases of 5.5 per cent followed by London city (4.6 per cent), Oslo (4.5 per cent) and London west (4.4 per cent).
Dublin’s top-quality office space is already attracting rents of up to €376 per sq m (€35 per sq ft). The JLL findings suggest that there will be a steady annual growth in rents over the next five years with prime rents reaching €511 per sq m (€47.50 per sq ft) by 2018.
While the €35 per sq ft is now widely acknowledged as the standard rate for new, well located city space, businessman Denis O’Brien has been the first to quote rents of at least €430 per sq m (€40 per sq ft) for a new high-quality office block, Canada House, he is developing at the junction of St Stephen’s Green and Earlsfort Terrace.
Other developers have also suggested that they will only embark on new developments when rents have bounced back to give an acceptable return on their investments. Apart from the Canada House project, the only one other speculative office development is under way in Ballsbridge where the Comer Group is building a mixture of offices and apartments on the site of the former UCD Veterinary College. The group bought the 2.02 acres site for €22.5 million – a long way from the €171.5 million paid for it during the property bubble by developer Ray Grehan.
With the supply of large volumes of office space rapidly running out in the city, some agents have expressed the view that rents could spike before the end of this year.
The JLL report also forecasts that rental growth in Dublin’s industrial market will also be steady with average annual increases of 7.3 per cent expected for the next five years. This is the strongest rental growth envisaged across the whole of Europe and is significantly above the best of the expected top five performing cities: Barcelona (+3.8 per cent); Stockholm (+2.7 per cent); Madrid (+2.4 per cent) and Berlin (+2.2 per cent).
Dublin’s industrial rents are forecast to rise to €69 per sq m (€6.50 per sq ft) this year and are expected to rise to €91 per sq m (€8.50 per sq ft) by 2018.
Hannah Dwyer, head of research at JLL in Dublin said that rental growth for the next few years was dependent on several factors. While demand would remain strong from occupiers the issues for office and industrial sectors was the supply. Across both sectors occupiers continued to be faced with a decreasing choice for prime space in key locations, particularly in certain size categories.
This had driven rental growth in the last 12 months and as supply was expected to continue to tighten further rental increases were forecast. “The property market has rebounded somewhat in the last 12 months . . . in terms of investment volumes, rents and capital values and the strong forecasts for office and industrial rents will further boost the sector’s recovery story.”