Irish property consultancy HWBC has dismissed a claim from businessman Denis O'Brien that Dublin's office market is currently in "bubble" territory, even as the firm expects prime rents to plateau in 2018 after more than doubling over the past five years.
In a market outlook due to be published on Friday, HWBC said 2017 was a record year for take-up of office space, with leases on 3.57 million square feet (331,664sq m) signed off on by tenants including Microsoft, JP Morgan, AIB, and Facebook.
Rents for top-grade office space in the central business district grew by 8 per cent last year to €65 per square foot, but are set to remain at that level in 2018, according to the property firm. Grade-A suburban rents are expected rise by 7 per cent this year to €32 per square foot, having gained 8 per cent last year.
The report finds that while construction of new office space is scaling up in Dublin, the fact that more than 80 per cent of new stock completed in 2017 was let on or before completion “should reassure investors concerned about oversupply”.
Mr O'Brien's comments, made last week on the fringes of the World Economic Forum in Davos, Switzerland, that Dublin is in the midst of an office-market bubble, where there will not be enough tenants to fill space being developed, have been rejected by voices from Taoiseach Leo Varadkar to CBRE Ireland's head of research Marie Hunt.
"Given our recent history it is sensible to be prudent after five years of gains which have seen city-centre office rents more than double, but all the indicators are that there is ample demand for space as it is completed, and close to 40 per cent of the space planned for 2018 is already pre-let," said Tony Waters, managing director of HWBC.
“It remains a landlords’ market, with further hardening of lease terms expected this year, including reduced rent-free periods and break options pushed out, rather than prime headline rents continuing to rise at a similar pace to recent years.”.
HWBC estimates that there is currently a 7 per cent vacancy rate in the Dublin office market, with 2.73 million square feet of space set to be built this year, up from 1.97 million square feet in 2017.