TAKE-up of office space in 1996 was the highest for many years, reaching 1.28 million square feet, according to a new report on the Dublin office market from Lisney. The vacancy rate has fallen below the 5 per cent mark, according to the agency. The report attributes the record take-up of space to the strong demand mainly from sectors such as software development and telemarketing.
With 1.28 million square feet either bought or leased since January, Lisney estimates there is only 700,000 square feet available and of this volume, about 180,000 square feet is currently being built.
Lisney's Peter Stapleton, who wrote the report, says the greatest activity within the last quarter has been at East Point Business Park in the Dublin docklands.
Kindle has taken 45,000 square feet and AOL Bertlesman has rented over 30,000 square feet. Other companies moving there next year will include Oracle and Quintiles.
"The attractions of such a location are the level of rent which is about £12.50 per square foot, tax incentives in the Enterprise Zone category and the speed of construction of efficient buildings," he says.
He points out that although the majority of buildings at East Point have been pre-let there is a block of 45,000 square feet being built on spec.
Mr Stapleton says the market has now swung in the landlords' favour and, except for secondary properties and fit-out contributions, concessions have largely disappeared. He says there has been a marked rise in rents for well-appointed accommodation.
"Nevertheless, break options continue to feature prominently in new leases," he says. "Within any lease, no more than one break option is generally granted and it is not operable until the 10th year.
He says tenants are reluctantly prepared to pay for these break options through rent penalties and prefer to have this flexibility in case poor market conditions prevail when an alternative premises is required. Six-month to 12-month penalties are not uncommon.
Mr Stapleton found guideline rents continue to vary enormously with top levels achieved at the IFSC of £27-£35 per square foot. The best office accommodation is fetching £15-£17 per square foot outside the IFSC and poorer buildings are making £10-£11 per square foot.
"Future development will gravitate towards the suburbs, where economic and efficient buildings can be constructed within reasonable time frames," he says.
Activity over the next 18 months is likely to focus on Shelbourne Road, The Sweep stakes Centre, Grand Canal Plaza, the Charlemont Centre, Blackrock (Carysfort Avenue), Clonskeagh, East Point and Tallaght.
"The next 12 months will be an exciting time, with little remaining static and considerable mobility expected," he says. "Rents and values will move upwards and forward planning by occupiers will become crucial."
Mr Stapleton says most players in the office market are watching developments in the Dublin docklands with keen interest. A new docklands development authority is to be established next January.
"A master plan for the area, which extends to some 1,500 acres on both sides of the Liffey, is now being prepared. This plan, says Mr Stapleton, will outline the basis for the development of the site over the next 15 years.
"While many uses, such as tourism, leisure and residential, will take maximum advantage of the waterways, office parks and business parks will no doubt be in the minds of many developers," he believes.
Although it is unlikely tax incentives will be available on a widespread basis for office use, this location should not be ignored, says Mr Stapleton.
