The Dublin Offices Market broadens its boundaries
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| Shortage of supply continues to dominate the Dublin Offices market, with availability at an all-time low. according to Maire Hunt. |
As can be seen from the following graph, there has been a dramatic decrease in the office vacancy rate in recent years. It currently stands at 1.9%, which is the lowest, recorded in over 30 years.
Because of the demand that exists in the market for offices in traditional locations, prime yields in the office sector have gone below 5% for the first time in over 30 years. £29.5m was invested in the Offices Sector in the first quarter of 1999.
While there is approximately241,540 sq. m (2.6m sq. ft) of office space being constructed in the Dublin region at present, at least half of this space has been pre-let. Lack of supply means that there is a continued upward pressure on rents, particularly in the third generation and Georgian office sectors. Indeed, the top rental value for third generation office space in Dublin is currently in the order of £279 per sq. m (£26 per sq. ft). This has risen by a staggering 30% since Q1 1998. Gunne Research predicts that this will rise to £322 per sq. m (£30 per sq. ft) before the end of 1999.
Take-up of office space is expected to exceed 185,873 sq. m (2m sq. ft) in 1999. The majority of office space continues to be taken up by financial and software companies. However, new sectors are emerging such as call centres and telecommunications. The nature of these businesses is such that they require large office units and it is envisaged that they will situate in suburban locations such as Sandyford, Citywest, Parkwest etc
The transformation of the Irish labour market from a blue-collar market to a white-collar market has changed the extent and type of accommodation being sought. According to the latest National Household Survey 61.5% of the total labour force are now employed in the Services sector as opposed to 44 % in 1978. Therefore, there is more demand for high quality office accommodation for managerial, administrative and research and development personnel.
48% of office take-up in Q 1 1999 was in Dublin 2/4. However, the shortage and expense of suitable office space in traditional locations in D2 and D4 together with ever increasing transportation problems will encourage more displacement to suburban office locations in 1999. Almost half of all new offices space being developed in Dublin this year will be in out-of-town locations and it is envisaged that this trend will continue in the years to come.
Suburban office parks with good transport connections will be very much in demand. The LUAS line will also open up new opportunities in areas such as Sandyford, Dundrum and Tallaght. We now have the situation where the industrial market has changed to such an extent that existing industrial buildings in areas such as Sandyford and Stillorgan are being redeveloped as high tech business/office units to cater for changing demands. Rents in these locations are envisaged to reach £215 per sq. m (£20 per sq. ft) before the end of 1999.
There will also be a greater tendency to refurbish older office stock in traditional office locations in order to capitalise on the severe lack of supply that exists in the market at present.
It is interesting to note that in comparison with other European capitals, Dublin office rents are relatively competitive.
The latest "World Office Rents" publication as produced by Richard Ellis and Gunne Property Consultants has just been released and produces some interesting results in relation to Dublin Office Rents in comparison with other major European cities.
Gunne Research estimates that in 1998 almost half of the 185,800 sq. m (2,000,000sqft) office space take-up in Dublin was by international inward investors such as multi-national telecommunications, software and pharmaceutical companies.
One of the main reasons why Dublin has become a significant player in the European office market in addition to fact that we have a highly trained workforce is that we compete well with other European cities in terms of rents and other occupational costs.
From the following graph, we can see that when compared to 17 major European cities, Dublin ranks 9th in terms of overall occupation costs. (Rent plus additional occupational costs such as stamp duty, rates and local taxes) |
Marie Hunt BSc ARICS ASCS MIAVI
Head of Research Department
GUNNE PROPERTY CONSULTANTS
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| Article appeared in the May 1999 issue.
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