The rate of increase in headline office rents, from €485 to €645 per sq m (€45 to €60 per sq ft), in less than two years has begun to slow, according to Paul Scannell of agent HWBC.

In his latest office report, he says that occupiers are showing resistance to the higher rents and are putting more emphasis on value, and high spec and energy efficient buildings. Some analysts had predicted that a headline rent of €753 per sq m (€70 per sq ft) would be achieved by year end but this looks unlikely and Scannell says €700 per sq m (€65 per sq ft) was a more realistic target.

The report shows that demand for space is being driven mainly by the professional and financial services sector with a preference for prime city space. Not surprisingly, Dublin 1, 2 and 4 accounted for 63 per cent of the total take-up in the first six months of the year.

This sector was also important to the suburban market with AIB, Royal & Sun Alliance and Bank of Scotland all acquiring space in locations like Swords, Dundrum and Cherrywood. Scannell says rents in the suburbs are showing signs of growth in certain locations for the first time in years. The Sandyford/Leopardstown area was the most popular due to the improved infrastructure and easy access from the prosperous south-east corridor. In Sandyford, rents of €323 per sq m (€30 per sq ft) were being achieved on new space with quoting levels as high as €377 per sq m (€35 per sq ft) for high quality developments.

The volume of space under construction - at 267,000sq m (2.874 million sq ft) - was down on this time last year. There is still strong occupier demand for the next 12 months with a less certain outlook beyond that as rising interest rates and a slowdown in GDP growth from the highs of the Celtic Tiger era may affect occupier demand.

In the city most development activity was taking place in the docklands and the emerging areas of Dublin 1, 3, 7 and 8. In the suburbs, the bulk of the activity was in Dundrum, Sandyford, Leopardstown and Blackrock where speculative development was seen as less risky and easier to finance. There was little speculative development in the north suburbs, except at Santry Demesne where two new buildings totalling 14,000sq m (150,695sq ft) are being built.