MarketSurvey: Gross take-up of office space in Dublin in 2004 reached 193,061 sq m (2.078m sq ft) - the highest the market has experienced since the boom year of 1998, writes Dr Clare Erickkson

Gross take-up of office space in Dublin in 2004 reached 193,061 sq m (2.078m sq ft) - the highest the Dublin market has experienced since the boom year of 1998. It was also an increase of 21 per cent on the previous year.

More than half (57 per cent) of all take-up was in the three central postal districts 1, 2 and 4, with the always-favoured Dublin 2 area leading the way with just over one-third of the total.

This take-up reflects almost precisely the distribution of completed office stock in Dublin: Dublin 2 accounts for 32 per cent of the 2,560,779 sq m (27.564m sq ft) total market, and the central area as a whole accounts for 54 per cent. Some 79 per cent (56,729 sq m - 610,625 sq ft) of all new space in 2004 was constructed in the city centre.

In the suburban office market, which covers seven distinct locations, the area that recorded the highest take-up levels for 2004 was the south-east region. This stretches from Donnybrook out to Cherrywoood, and had 10 per cent of the year's overall total.

Underlining the strong technological bias of the capital's economic development, IT companies alone accounted for one-fifth of all the space taken up in the Dublin market last year. They were followed in the league table by legal firms (15 per cent of take-up) and banks (9 per cent).

Almost two-thirds of the entire take-up was accounted for by two business sectors - business services at 45 per cent (led by IT companies and legal businesses) and finance at 17 per cent (led by banks, finance, insurance and pension companies).

At the other end of the scale, despite all the talk about decentralisation, the public sector is still a net taker of office space in the Dublin market. During the year the Office of Public Works absorbed 7,622 sq m (82,042 sq ft) of space (or close to 4 per cent of the total), more than half of it in the final quarter of the year.

The volume of corporate vacant space in the Dublin office market decreased at a moderate but steady pace throughout 2004, which is a positive indicator for the performance of the office market in 2005. In the last quarter of the year 105,261 sq m (25 per cent of all available space) was surplus occupier space released onto the market. However, as 2004 progressed take-up of developer stock increased from 71 per cent in Q1 to 84 per cent in Q4.

With take-up increasing by 21 per cent and completions declining by 16 per cent compared to 2003, the year saw a modest tightening in the vacancy rate for completed stock - down from 17.3 per cent at the beginning of the year to 16.6 per cent at the end. When vacant stock under construction is included, the overall Dublin office vacancy rate at the end of 2004 is 21 per cent. However, these overall figures mask two quite different pictures that occur in the city centre and in the suburbs as vacancy rates vary greatly between the two areas. For example, in Q4 2004 vacancy rates in Dublin 2 were only 9 per cent, compared to 16 per cent in the M50 north area and 27 per cent for all the suburban areas taken together.

At the end of 2004, some 224,834 sq m (2.42m sq ft) of office space was under construction, more than double the amount at the beginning of the year. Half of this in Dublin 2, and four-fifths in the city centre area. Of the total under construction, 31 per cent is pre-let; this rises to 53 per cent in Dublin 2. Further down the supply pipeline, planning permission has been granted for a further 844,461 sq m (9.089m sq ft) of office space in the Dublin area. However, the overwhelming majority (around 63 per cent) of this planned place is outside the central city area.

In 2004 Jones Lang LaSalle analysed Dublin offices by the internationally recognised grading definitions, which should facilitate a greater understanding of the characteristics of the market in the future.

The grading definitions are: Grade A - buildings with rents that are above average for the area. These buildings should have high quality standard finishes, state-of-the-art systems and good accessibility.

Grade B: Buildings with rents in the average range of rents for the area. Building finishes are fair to good for the area and systems are adequate, but the building can no longer compete with Grade A at the same price.

Grade C: Buildings with functional space at rents below the average for the area.

Of the completed and vacant office stock in Dublin, 30 per cent is Grade A, 29 per cent is Grade B and 41 per cent is Grade C indicating a dominance of Grade C vacant stock in the market.

In the 2002-2004 period take-up of Grade B Dublin office space was consistently higher than that of Grade A and Grade C stock. The higher take-up of Grade B reflects the number of tenants who were rent-sensitive in this period.

Dr Clare Erickkson is head of research, Jones Lang LaSalle, Dublin