Rents for prime Dublin office space will rise 10 per cent this year, after a 15 per cent climb in 2013, HWBC has forecast. The property asset managers say the trend is prompting developers to consider investing in new sites.
The total office space let in Dublin last year increased 20 per cent to 179,000sq m “after four tough years of readjustment”, while the vacancy rate fell to 17.5 per cent, down from the peak rate of 22.8 per cent in 2010.
HWBC’s annual review of the office market found high-quality “grade A” offices accounted for 60 per cent of take-up last year following strong demand from the multinational sector.
Facebook and Yahoo
International companies closed seven of the 10 largest office deals last year, with media and technology firms, including Facebook and Yahoo, taking 42 per cent of the space let. Financial services firms were the second most active, taking 27 per cent of let space.
The largest office letting deal in 2013 was Facebook's occupation of 11,300sq m on Grand Canal Square. This was followed by Deutsche Bank's new headquarters in East Point, Dublin 3, which also broke the 10,000sq m level. New entrants to the market included Airbnb, Regeneron and Yelp.
However, conditions remained weak at the lower end of the market, with only 3 per cent of the office space let last year coming from "grade C" or obsolete buildings. A legacy of oversupply remains, particularly in suburban locations in the north and west, HWBC said.
"Rental levels of prime new developments are likely to reach levels high enough to justify investment in new development," said HWBC director Paul Scannell. "You can expect cranes and building activity to become a more common sight in Dublin this year after several quiet years."
Although international companies have been the drivers of the recovery, demand from indigenous firms will also grow in 2014, HWBC believes.
“A number of Irish professional service firms are reviewing their space requirements, and with quality office space now in short supply further capital and rental appreciation are expected this year,” said Mr Scannell.
"We expect lease terms to strengthen for landlords in 2014, with rent-free incentives for tenants to fall further as competition for space continues," he said. The year may also see the first significant "pre-let" deal on an undeveloped site since the property crash.