THE DUBLIN office market has now bottomed out and with no new supply coming on stream there was likely to be a double-digit rental growth in key city centre locations over the next 18 months, according to the latest study of the market from estate agents Lisney.

James Nugent of Lisney said office rents had fallen by 56 per cent in the general Dublin area since the end of 2007. However, the market had now bottomed out and “we have not witnessed any further falls over the last nine months”. Demand for space over the next 18 months would remain “moderate” and would be dominated by overseas occupiers.

Lisney said letting activity over past three months had been at about the same level as in the first quarter and it now seemed likely that overall transactions for this year would match those in 2011 when 164,000sq m (1,765,263sq ft) of space was let.

Nugent said office lettings were probably one of the better performing sectors, but like all market activity “can be sporadic and at times confusing”. On the positive side, there were plenty of enquiries from strong international brand names seeking accommodation and those close to concluding transactions or rumoured to be in the market included Amazon, SAP, Score Reinsurance, Facebook, Twitter, Deutsche Bank, NIB, Bank of New York Mellon, Yelp, Microsoft and Capita.

He said Lisney was currently representing 25 companies which had a minimum requirement of 38,000sq m. “Yet despite all of this activity, we are still a little nervous about where the market is going.” Part of the nervousness came from the lack of activity from indigenous businesses and it was now clear that the vast majority of enquiries for space were on behalf of businesses that did not derive their income from providing services to the Irish market and were instead providing internationally-traded services from within Ireland.

The Lisney report shows that 21 per cent of the office lettings so far this year has been to companies in the information and technology sectors. More importantly, companies in these areas were the most active in ongoing inquiries for more space. A surprise is the strong strike rate of companies in the financial services and related industries, which for the year to date also accounted for 21 per cent of all activity.

Meanwhile, Roland O’Connell of Savills said that while office lettings were holding up relatively well, take-up for the year as a whole would be less than previously expected due to caution on the part of businesses to relocate and expand in the current economic climate.

Joan Henry, director of Savills' research department, said 66 per cent of the space taken up in Q2 was located in Dublin 2 and 4. This added weight to their view that prime rents had now bottomed out in the current range of €290 to €310 per sq m (€26.94/€28.79 per sq ft).

Deirdre Costello of Jones Lang LaSalle reported that the total take-up for the first six months of the year at 61,337sq m (660,253sq ft) was 30 per cent lower than in the same period last year. “There are, however, still a significant number of ongoing deals totalling almost 27,870sq m (300,000sq ft) which supports our view that the total take up for the year should exceed one million sq ft.”