Market AnalysisAnother exceptional year is in prospect for Dublin office take-up in 2007, according to the latest Lisney Office Market Report.

Last year was a record-breaking year in terms of transactional activity and already this year there is an increase of 20 per cent in the take-up in the first quarter over the same period last year, the highest ever recorded in the Dublin market.

Office take-up hit record highs last year and rents increased by 11.3 per cent overall, the survey shows. A total of 233,613sq m (2.514 million sq ft) of office space was taken up in the Dublin region, representing an increase of 13 per cent in the year.

Headline rents for new buildings in Dublin city centre, the area most in demand, are running at €646 per sq m (€60 per sq ft), a level they reached at the end of last year. But Lisney predicts that the €700 per sq m (€65 per sq ft) barrier could be broken by the end of this year, as the majority of the new supply of office accommodation is absorbed by the market.

Second generation buildings also are performing well, with rents increasing from €377 per sq m (€35 per sq ft) at the end of last year to around €388 per sq m (€36 per sq ft) at present and an expectation of an increase to €430 per sq m (€40 per sq ft) by the end of this year.

Georgian rents may grow to €431 per sq m (€40 per sq ft) by year end. Car-parking spaces are likely to rise from €4,000 to €5,000 by the end of next year.

The positive economic conditions underpinning the strong occupational demand last year continue to apply, with real GDP growth forecasts for this year ranging from 5 per cent to 5.6 per cent, the recent OECD report showing 4.1 per cent growth for 2006, the Quarterly National Household Survey showing 77,000 new jobs created and ESRI predictions of similar job growth this year.

"According to forecasts in the medium term review, over 40,000 of these are likely to be in the service industries that tend to be heavy users of office space. In the longer term, service sector employment is expected to increase by 271,000 over the next six years. All in all, therefore, there is a very positive backdrop for the office market as we move forward," according to Lisney.

The financial services sector has been very active in the market, accounting for 35 per cent of all transactions by size in the first quarter of this year. This reflects the continued growth of an industry that has seen employment grow by over 50 per cent in the last eight years.

The IT sector has accounted for some 30 per cent of take-up and professional services - legal, architecture, etc - increased its share of take-up from 10.6 per cent in the final quarter of last year to 13.3 per cent in the first quarter of this year.

The State sector's share of the take-up increased dramatically to 18 per cent in 2006; it has now fallen back to 9.1 per cent. Lisney will monitor this on a yearly basis in light of the impact decentralisation may or may not have.

Lisney points to the increasing concentration of take-up in the city centre. Whereas less than half occurred in the city centre in 2003, by the end of last year this had risen to 64 per cent and now stands at 70 per cent.

This, Lisney suggests, has been influenced by the growth of the financial and professional services sectors, but also by the nature of Dublin's transport network. "This makes the city centre accessible from all areas which may offer logistical advantages to employers and to employees."

Total available office space in the Dublin region is 321,377sq m (3.459 million sq ft); the supply in the city centre remains limited and there is little sign of this increasing to meet demand, as over 44 per cent of the city centre space under construction is already pre-let.

Over half of the space available in Dublin is located in the city centre; 90 per cent of new completions last year were concentrated in the centre of town, where demand continues to be very strong.

Vacancy rates are largely unchanged from last year and are less than 9 per cent. Figures on the supply of available office stock include buildings nearing the end of their life cycle. "Many of these are considered to be uninhabitable by corporations and, if they were removed from our figures, the true vacancy rate would be even lower than 9 per cent," according to Lisney. The agency also reports that leasing activity was brisk in the south suburbs, reflecting existing and planned light rail links in the area. Take-up also increased in the western suburbs but there was virtually no activity in the north side.