Office space in prime locations in Dublin is now commanding up to £25 per sq ft in rent and is likely to exceed this level shortly, according to market experts.
Rent reviews taking place around the city are reflecting significant increases, in one case as high as 100 per cent for a third generation block first rented in 1992. Older office buildings are also experiencing impressive rent increases, achieving between £14 and £18 per sq ft.
An 85,000 sq ft office building in Hatch Street is expected to fetch £27 or £28 per sq ft - one of the highest rents for a large volume of space (90,000 sq ft) outside the International Financial Services Centre. The State is also having to pay much higher rents and is looking to the suburbs in order to provide accommodation for public servants. The OPW, which manages the State's property portfolio, is to pay £23.75 per sq ft at Clonmel Street, off Harcourt Street, Dublin 2, although it has stressed this is "exceptional".
"We now see £30 per sq ft being achieved and it seems likely that this could be reached in the next 12 to 18 months," says Nicholas Corson of Finnegan Menton.
An overwhelming demand for office accommodation in Dublin and a dwindling supply has resulted in a "very significant growth in rents" in the past six to 12 months, according to Mr Corson.
In terms of new letting, prime office space in Dublin 2 and 4 is now fetching in excess of £20 per sq ft and in some cases is achieving £25 per sq ft.
Rent reviews taking place around the city are expected to reflect these increases even though reviews tend to lag behind the market.
Well-located third-generation buildings are already achieving in excess of £22 per sq ft, while some second-generation properties are commanding rents of £18 per sq ft in many cases, says Mr Corson.
Wilson House, a 22,000 sq ft office building in Fenian Street, Dublin 2, was let for £8 per sq ft in 1992. When it was reviewed in 1997, the rent was set at £16 per sq ft - a 100 per cent increase.
Rent reviews often take 12 months or more and other such settlements are expected to be reached in the coming months.
In the case of second-generation properties, Russell Court, on St Stephen's Green, Dublin 2, had its rent set at £10.50 per sq ft in 1992 and this was increased to £14 per sq ft in 1997, a growth of 33 per cent.
Office space in Georgian buildings is at a particular premium. New lettings in Fitzwilliam Square, Merrion Square and other sought-after locations have now reached up to £20 per sq ft.
On the sales market, Georgian properties in Merrion Square have sold for more than £1.5 million, while a building at 42 and 43 St Stephen's Green reportedly fetched £3.2 million. The growth in capital values is linked with the improvement of the office rental market, according to Killian O'Higgins of DTZ Sherry FitzGerald.
"People began to see them as good value homes. Tony O'Reilly bought one as a residence in Fitzwilliam Square and people are changing some of these properties from offices to homes," says Mr O'Higgins.
"What that is actually saying is that, as offices, these properties were being undervalued and this has helped lift capital rental values in Georgian buildings."
Competition for available office space in the booming capital is intensifying. Such is the dearth of office accommodation that the State is building its own offices for the first time in decades.
The Office of Public Works is to build an office block of up to 120,000 sq ft on a one-acre site in Hammond Lane, near Smithfield, Dublin 7, which it bought for more than £4 million.
Previously, the State relied largely on the private sector to provide most of its accommodation.
In a surprise move, the OPW outbid half a dozen residential and office developers for the site, which was owned for many years by the match making company Maguire & Patterson. It also paid around £6 million for a 30-yearold office building in Ardee Road, Rathmines, Dublin 6, which is rented by the Central Statistics Office.
The scarcity of office space in the capital has also prompted the OPW to avail of a break clause and remain on in St Stephen's Green House at Earlsfort Terrace, where it will continue to rent 33,000 sq ft. The current rent of £10 per sq ft is to be reviewed next year.
Niamh O'Regan, assistant principal officer in property management services at the OPW, says State rents have grown significantly under recent rent reviews, although they would still be lower than those paid by the private sector. Rents at around a dozen offices, which were subject to reviews during 1998, rose by between 40 and 60 per cent.
The State is to pay £23.75 per sq ft to rent office space in the city centre, although this is "exceptional" because of the client involved, according to Ms O'Regan.
Very few rents of £20 or more are being paid by the State, but this is likely to change if the pressure on the market continues.
"We see the £20 mark as a psychological ceiling, but in the current market that is not particularly high. We [the OPW] are going to have to realise that if we want the accommodation we will have to be prepared to take it at the best available price," says Ms O'Regan.
The OPW is now looking beyond the cramped precincts of Dublin 2 and 4 to the suburbs. In many cases, civil servants are quite happy to work in Blanchardstown, Bray, Tallaght, and other suburban areas, largely because of shortened journeys times.
"We have been fortunate and have paid less than most in rents in this buoyant time. We do have a policy to relocate to the suburbs and that takes the pressure off where we really need city centre accommodation," says Ms O'Regan.
Any city centre activity in 1999 will be concentrated on Adelaide Road, Earlsfort Terrace, Hatch Street and the Grand Canal and South Docks areas. However, in the suburbs, a number of schemes are proposed which will provide good quality office space. These include developments at Sandyford, Parkwest, Citywest and Dun Laoghaire and Bray, Co Wicklow.
