Office vacancy rate drops to 12.9 per cent

OfficeMarket: The Dublin office market ended on a strong note in 2004, pointing to continued growth this year

The overall vacancy rate in the Dublin office market fell to 12.9 per cent by the end of the fourth quarter of 2004.

The positive note to the end of the year indicates a new confidence and points to continued growth during 2005, according to a market review.

The sector usually benefits from a late surge during Q4, the review from CB Richard Ellis Gunne acknowledged, but it also pointed to ongoing recovery, according to Mr James Mulhall, the company's head of office agency.

Take-up in the Dublin office market during Q4 reached 46,787 sq m (503,610 sq ft) bringing total take-up for 2004 to 161,411 sq m (1.73 million sq ft).

This compared favourably with the 2003 figure of 141,785 sq m (1.52 million sq ft).

About 67 per cent of total office space signed during last year was in the city centre market and of this 77 per cent was in the prime Dublin 2/4 districts.

The 33 per cent balance of this take-up was in suburban locations and of this, 86 per cent was in Dublin's south suburbs.

The strength of these suburban locations was probably attributable to the opening of the LUAS line, according to the company. It expects this trend to continue and be replicated along the Tallaght LUAS line during 2005.

Prime rental levels remained static at €485 per sq m (€45 per sq ft), although the company is predicting rents to increase during the coming year, particularly in the city centre. Increases will be linked to a lack of supply, according to the review.

This could already be the case in the key Dublin 2/4 areas where the vacancy rate for prime properties currently stands at 7 per cent, almost half the general figure for Dublin city.

This strength is not repeated in the suburbs where the company expects inducements to continue to form part of most deals.

The company estimated current Dublin office market demand at 253,000 sq m (2.72 million sq ft). Of this 72 per cent is focused on the central business district with the remainder divided amongst the suburban markets.

"The prime focus of occupier demand continues to be the city centre and the potential undersupply of new office buildings capable of meeting this resurgence in demand should lead to an increase in rental and capital values in this region during 2005," stated Mr Mulhall.

European office markets are performing in a "very similar vein" according to CB Richard Ellis Gunne's director of research, Ms Marie Hunt.

"Growth has been seen in most European markets in recent months, however the strongest take-up of office space has been in locations with the highest level of economic growth, most notably in Barcelona and Madrid," she said.

The continued strength of the Republic's economy therefore bodes well for the office sector in 2005, she concluded.