Dublin city office rents will plateau next year at levels last seen at their 2008 peak as new developments come on stream and the market “is closely watched for signs of oversupply” until a clearer picture emerges of the needs of UK firms moving activities under Brexit, according to a new report.
Real estate advisory firm HWBC estimates prime rents in the city centre will peak at €65 per square foot (€700 per square meter) in 2017, compared to €62 currently and a low-point of €28 in 2012. The company’s office market review of the first half notes that demand so far this year has been driven by Brexit, with at least 15 global financial institutions announcing their intention to set up or extend their existing operations in Ireland.
Take-up of new office space rose by 56 per cent in six months compared to the same period last year, to 1.67sq ft, with US banking group Barclays signing up as tenants at Green Reit's One Molesworth Square and US financial giant JP Morgan's decision to acquire a building being developed by Kennedy Wilson in the south docklands. US banks Bank of America Merrill Lynch and Citigroup are also among firms that plan to expand in Dublin.
“Given the large volume of new space coming to the market, and with almost 4 million sq ft under construction, it is no surprise that rental growth will likely reach its peak next year,” said Tony Waters, managing director of HWBC. “That shouldn’t be a cause of concern for investors and landlords, given there remains strong tenant demand, with 90 per cent of new space being let on completion.”
The biggest letting deals in the first six months of the year include Facebook taking 170,000sq ft of space at the Comer Group's The Beckett building in East Wall in Dublin's north inner city and AIB's decision to move 500 support staff into 152,000sq ft of space in Leopardstown, owned by Green Reit.
However, the report warned that Ireland will lose out to its main competition in Frankfurt, Paris and Amsterdam for some Brexit-related activity amid a dearth of affordable residential accommodation in Dublin.
This week, the chief executive of Dublin-listed homebuilder Cairn Homes, Michael Stanley, said that while enough office space is currently being developed in Dublin's city centre to accommodate 60,000 people, builders are currently only constructing enough residential units to house 1,600 people.