Dublin office letting market in upward growth

THE DUBLIN OFFICE letting market has had its best three-month performance up to the end of September since the onset of the downturn, according to DTZ Sherry FitzGerald. Take-up of office space in the city and suburbs is now expected to reach 120,000 sq m (1,291,668 sq ft) by year end, marking the first notable drop in supply levels since the last quarter of 2008.

Three other agencies are even more optimistic about the likely year-end figure, with Savills predicting that take-up could reach 150,000 sq m (1,614,585 sq ft) and both Lisney and Jones Lang LaSalle estimating that the figure could be 158,300 sq m (1.7 million sq ft) by December 31st.

DTZ reports that 44,700 sq m (481,146 sq ft) of office space was let in the third quarter but says that the outlook for 2012 is more uncertain, amid growing fears that a double-dip global recession could be imminent. However, Savills is predicting that the office market will continue to lead activity in Dublin’s commercial property market with a “downside potential for rents now very limited.”James Nugent of Lisney said there is significant evidence that the market is moving into a recovery phase but despite this rents had yet to start rising. “Nonetheless it is clear that the rental falls have ceased”.

Marian Finnegan, chief economist with DTZ Sherry FitzGerald, said the performance in the third quarter improved markedly as measured by both aggregate take-up and individual deals. However, caution was required as previous quarterly figures had been volatile and continued uncertainty surrounding the euro zone debt crisis and growing worries regarding the outlook of the US economy were most likely to have an effect on activity in the coming months.

Roland O’Connell of Savills predicted there would be no speculative office scheme in Dublin until 2014 at the earliest. Any development likely to proceed in the meantime would be pre-let. Prime rents, he said, had stabilised in 2010 at close to € 350 per sq m (€32.50 per sq ft) but deals in prime locations had been completed this year at € 300 per sq m (€27.80 per sq ft). Meanwhile, Deirdre Costello of Jones Lang LaSalle contends that rents have bottomed out with an average Q3 level of €269 per sq m (€ 25 per sq ft) in the city centre and € 172 per sq m (€ 16 per sq ft) in the suburbs. DTZ said tenants acquiring new space can expect an average two months rent free per year term.

The DTZ report calculated that the number of deals transacted almost doubled to stand at 60 in the three months up to the end of September. Transaction activity over the past 12 to 18 months was dominated by smaller-sized deals of 500 sq m or less. The third quarter witnessed a strengthening in demand for medium-sized deals with a notable increase in the number transacted during the three-month period. The outlook for take up for the remaining three months of the year was positive, based on the fact that about 36,600sq m (393,959sq ft) of space was signed and awaiting occupation. A further 32,200sq m was reserved. Future demand, as reflected by the level of inquiries, remained robust – a number of high-profile companies such as Paypal, Salesforce, CITI Group and BNY Mellon had large requirements for space. However, the renewed challenge facing the global economy may lead to nervousness and uncertainty on behalf of potential corporate occupiers and, in particular, multi-national occupiers to commit to deals.