Stalled office market set to get moving

There is significant demand for office space in the Dublin market as tenants take advantage of break options to seek better value, writes JACK FAGAN

THE STANDSTILL affecting the Dublin office letting market over the past six months is set to end with a large number of companies now looking for high quality space mainly in the Dublin docklands and the south of the city.

The renewed demand comes at a time when the volume of vacant space is at its highest for years, rents have fallen back and many landlords continue to offer a range of incentives, including fit-out, to attract firms with a good track record.

The companies which have instructed office agents to find suitable accommodation include the Central Bank, Bord Gáis, ESB, National Irish Bank, eBay, Bentleys, Regis, Yahoo and LinkedIn. AIB Capital Markets is also expected to renew its search for a substantial new office block when the bank gets over its present difficulties.

Most of the companies looking for space are availing of break options in their leases to shop around for better located third generation buildings at discounted rates. Some of the tenants will also be demanding full fitouts because of funding difficulties during the current banking freeze.

James Nugent, who heads up the Lisney office division, says he believes that newly built office blocks of exceptional quality would all be taken up this year. He also expects rental growth to return sooner than expected. Well located third generation office blocks, which had been letting at the mid to low €30s per sq ft (€322 per sq m) are now making in the late €30s per sq ft (€410 per sq m), he says.

Lisney estimates that the overall vacancy rate stands at 22 per cent but, of the 18 per cent of space available in the city centre, about 25 per cent of it could be described as “fundamentally obsolete”, says Nugent.

Roland O’Connell of Savills is also of the view that Dublin rents have bottomed out but says it could be some time before they start rising again. Viewings have increased significantly since the beginning of the year.

Meanwhile, Willie Dowling of CBRE says he, too, believes that prime rents would not fall below their present level of €35 per sq ft (€376 per sq m) though they were well down on their 2007 peak rate of early to mid €60 per sq ft (€675 per sq m).

The Central Bank’s expanded role in the banking system means it will need an additional 4,645sq m (50,000sq ft) to accommodate some 200 staff to be hired later this year. Apart from its head office on Dame Street, the bank also has a separate operation at Spencer Dock. Lisney is advising the bank.

Bord Gáis is also looking for 4,645sq m (50,000sq ft) of offices, preferably in a high profile location in the south inner city. The company is understood to be looking closely at David Arnold’s new block at 1 Warrington Place, Derek Quinlan’s long vacant Observatory building at Sir John Rogerson’s Quay and Trinity Point on Nassau Street. Agent Donal O Buachalla is advising the board.

The ESB has appointed agent BNP Paribas Real Estate to find an almost similar sized block in the city centre now that its 35-year lease of Clanwilliam House at Clanwilliam Place, Dublin 2, is due to run out in July. The board is paying a rent of €375,000 for 3,716sq m (40,000sq ft) of space and €3,000 for car-parking spaces in what is now a tired block owned by the Irish Airline Pension Fund.

However, before the ESB can walk away, it will have to deal with a schedule of dilapidations which will cost it well over €1 million. Conor Whelan of BNP Paribas, who is advising the ESB, declined to comment yesterday.

National Irish Bank has engaged Savills to find a high visibility headquarters of around 5,574sq m (60,000sq ft) after deciding to avail of a break option in its lease on a premises at Airton Road in Tallaght.

The bank wants to capitalise on the decline in city rents in the knowledge that staff will be happy to relocate to a more vibrant working environment.

Like so many other companies, eBay is also relying on a break option in its lease to reduce its rental bill. The company is paying Green Property Company over €1 million a year for 6,967sq m (75,000sq ft) at The Atrium in Blanchardstown. A string of developers are anxious to attract the online auction giant but Green will be equally keen to hold on to the tenant, even at a lower rent. eBay is being advised by HT Meagher O’Reilly.

Regis, the UK plc specialising in serviced offices, is planning to open three or four further centres in Dublin, each with around 1,393sq m (15,000sq ft). The preferred locations are Dublin Airport, the IFSC, St Stephen’s Green and south Dublin. The company will be offering landlords a basic rent and the balance by way of turnover – an arrangement that may not suit many owners. PNB Paribas is advising the London company.

Yahoo is reviewing its office requirements now that it has a break option in its lease on premises at Eastpoint. At the end of the day it may stay in Eastpoint where its staff of 250 occupy a 2,787sq m (30,000sq ft) building. Agent DTZ Sherry FitzGerald is also checking out suitable buildings in the city centre.

American company Bentleys, which specialises in software solutions for infrastructure, has commissioned Mark Smith of Knight Frank to find 1,393sq m (15,000sq ft) in Dublin city centre or in the south docklands area. The company, which has been involved in the planning for the Aviva stadium at Lansdowne Road, is expecting to have a staff of 150 in its Irish operation.

Another new company moving into Ireland, LinkedIn, the online business networking site, has asked DTZ Sherry FitzGerald to find a suitable city centre office location with between 650 and 929sq m (700/1,000sq ft). The company was launched in 2003 and has more than 60 million registered users, more than half of them in the US.