Headline office rents in Dublin could rise to a new record of €67 per square foot by 2018, according to new research from property agent Savills.
The analysis by its director of research John McCartney shows that rents for top-quality offices in Dublin’s prime business locations stand at about €60 per square foot, although the growth has slowed somewhat this year.
Mr McCartney said base effects, combined with pre-lets which are available at a discount to the rents on space for immediate occupation, mean that the rapid rental growth seen in 2013 and 2014 will not be repeated in the current cycle.
Nonetheless, based on supply/demand fundamentals, he is predicting that headline values will reach €63 per foot by this time next year, and €67 per foot by December 2018.
“If consensus economic forecasts prove correct the demand for business space should remain strong. Equally, while there is a considerable amount of new office space under construction, this is unlikely to flood the market for two reasons.
“Firstly, much of what is currently under way is already spoken for, meaning that it will not overhang the market. Secondly, a lot of this space will not be finished until 2018 at the earliest. Our modelling, which is based on data stretching back almost 40 years, shows that new supply tends to have a delayed impact on rents.”
Savills forecasts are predicated on a technical assumption that Brexit would not have a net negative impact on Dublin office demand. It has assumed GNP growth of 5.9 per cent in 2016, and 3.2 per cent in 2017 and 2018, which is in line with consensus forecasts.
New completions are assumed to add 1.7 per cent to the total office stock in 2017, and 2.3 per cent in 2018. The vacancy rate is assumed to fall from 9 per cent currently to 7.9 per cent in 2017 as demand continues to absorb existing vacant space.