OfficesThe Dublin office market is still in trouble. Despite a number of significant lettings in the third quarter, the vacancy rate in the suburbs remains high at 15.75 per cent while the rate in the city stands unchanged at 14 per cent.
Latest figures from CB Richard Ellis Gunne show that there was a take-up of 42,314 sq m (455,463sqft) in the overall market in the third quarter, bringing total lettings for the year to 103,609 sq m (1,115,236 sq ft). The agency is predicting that the take up by year end should reach 150,000 sq m (1,614,585sqft) because of the activity of indigenous occupiers taking advantage of the "relative value available" - in other words, the discounts being offered by developers.
Though a number of high profile buildings such as O'Connell Bridge House, fronting on to O'Connell Bridge, have now been vacant for long periods, agents representing some of the large new developments under way around the city are reporting surprisingly strong interest.
Companies looking for significant volumes of new space include O2, (7,432 sq m, 79,997sqft); Mason Hayes Curran (5,574sqm, 59,997 sq ft); Independent Newspapers (3,716sqm, 40,000 sq ft); ESBI (6,500 sq m, 69,965 sq ft); and Dillon Eustace (4,645sqm, 49,998sqft).
Much of the attention is being focussed on the Barrow Street area of Dublin 4, where three substantial office blocks are being built on a speculative basis. Gunne estimates that new city centre rents are now running between €320 and €500 per sq m (€29 to €46 per sq ft) while those in the suburbs are around €232 (€21).
Developers and their agents invariably like to give the impression that they are sticking close to their letting terms. The reality is different. Every company looking for space is being offered a range of incentives including lengthy rent-free periods, free fit-outs and break options every few years.
In many instances developers are taking on responsibility for their tenants' existing office space once they agree to move .
Though some of the companies looking for new space will almost certainly come to a decision over the next few months, there are indications that the overall vacancy rate in the city will remain stubbornly high because of the number of redundant office blocks coming back on the market as a result of corporate cutbacks and better use of existing space.
One such example is at the Adelphi Centre in Dún Laoghaire where telecommunications giant Ericsson is vacating two of the five blocks it has been occupying for over a decade.
Both blocks are owned by the ESB Pension Fund which has been diverting its funds into the city centre in recent years. Jones Lang LaSalle and Lisney are quoting a guide price of €9.5 million for the two blocks which have a combined floor area of 3,066 sq m (33,002 sq ft) and generous car-parking.
Blocks A and G of the centre, located on Upper George's Street in the town centre, are for sale in one or two lots and include parking space for 42 cars at basement level.
Ericsson also occupies three other buildings at the Adelphi Centre.
The company has been paying a rent of almost €900,000 for the two buildings now on the market and was due to have the rent reviewed in 2005.
Though the 20-year lease is not due to end until 2020 there is a break option in 2110.
Ericsson has been in discussions with the ESB Pension Fund on its plans to move out of two of the blocks and it is understood that the level of compensation to be paid by the company for moving out early will be determined by the prices eventually obtained for the buildings. However, the compensation is likely to be equivalent to about two or three years rent.
"In terms of size and location, this office space would be ideal for an owner occupier or someone seeking an area with superb transport links and facilities and without the traffic congestion of the city centre," according to Deirdre Costello of Jones Lang LaSalle.
The Adelphi Centre is in the centre of Dún Laoghaire, which has seen a considerable amount of commercial and residential development in recent years.
Block A faces onto Upper George's Street while Block G is behind it, facing onto a courtyard in the centre of the complex. They are for sale as one unit or as two units of approximately 1,500 sq m (16,145 sq ft) each at guideline prices of €5.25million and €4.25 million respectively.
"Freehold office properties such as these with vacant possession are in good demand from owner occupiers due primarily to the continuing low interest rate environment and the desire to avoid ongoing rent increases," advises Peter Stapleton of Lisney.
However, the letting market for vacant buildings is still relatively slow, so much so that the vacancy rate in the city centre stands at 14 per cent.
Lisney is also seeking over €8.75 million for Kestrel House, a 1,664 sq m (17,911 sq ft) office block at Clanwilliam Place, Dublin 2, which is vacant and was once occupied by Eircom.
The agent suggests that the new owner may be able to enlarge the block, which is lower than adjoining Marine House.
