Pick-up in demand for office space

TAKE-UP OF office space in the Irish market this year will be 40 per cent higher than in 2009, according to the latest predictions from estate agent Savills.

Roland O’Connell, director of office services at the agency, says foreign direct investment companies are the main driver of the pick-up in demand for space and will remain important players in the immediate future.

Joan Henry, head of research at the agency, has calculated that there were 55 office lettings in the third quarter, accounting for 26,900sq m (289,549sq ft) of space – 17 per cent more than in the second quarter. Between January and September, a total of 71,000sq m (764,237sq ft) of space was let. By year-end that should rise to 100,000sq m (1,076,391sq ft).

Most demand for space in the city centre came from the IT and communications/media sectors, with Facebook taking an extra 1,106sq m (11,905sq ft) in Dublin 2 and Google moving into an extra 3,340sq m (35,951sq ft) of space at East Point, having leased a similar sized building earlier in the year. “The ongoing activity from these sectors highlights Dublin’s continued attractiveness to international firms as a base for their European operations,” says O’Connell.

Take-up is still strongest in Dublin 2, which accounts for 33 per cent of the letting market in the third quarter. Only 6 per cent of the newly occupied space was in Dublin 4, while the north city centre areas of Dublin 1, 3, 7 and 8 accounted for 28 per cent of the letting market.

The vacancy rate for the Dublin area increased from 21 per cent at the end of 2009 to 23.6 per cent in the last quarter. This was largely due to tenants sub-letting parts of their office space and also because of the completion of new blocks with a total floor area of 48,000sq m (516,668sq ft). More than 45 per cent of the available space is in units of less than 500sq m (5,382sq ft). Only 1 per cent of the vacant units have more than 10,000sq m (107,639sq ft) of floor space.

O’Connell says office rents are continuing to stabilise, with prime city rents now in the region of €375 per sq m (€34.84 per sq ft). Rents in secondary blocks and locations are about €215 per sq m (€19.97 per sq ft). He said that, with few new office blocks due to be completed in 2011, the supply of high quality space would diminish, leading to increased demand and rents for vacant Grade-A stock in prime locations.