Office and retail rents in Dublin to rise by 12%, new report finds

Prime office and retail rents in Dublin are to rise by about 12 per cent in 2016, according to a new commercial property outlook from the Society of Chartered Surveyors Ireland.

The SCSI outlook also forecasts a 12 per cent rise in Dublin office development land values – this is after a 27 per cent increase in 2015 – leaving Dublin the only region in which growth in the value of office development land exceeds growth in the value of residential land.

Almost 500 chartered surveyors were surveyed for the SCSI annual report which is published in conjunction with Future Analytics Consulting.

According to the report there was a 24.1 per cent rise in prime office rents in Dublin in 2015, with prime office rents now at €561 per sq m ( per sq ft). Many companies were enticed by lower rents to suburban and regional locations and the SCSI reports a “a marked increase in activity and demand for office space in the regional cities as economic recovery results in an increase in new company formations and expansions”.

It predicts that prime office rents in Connacht/Ulster will rise in 2016 by 5.2 per cent and in Munster and Leinster (excluding Dublin) by 5.9 per cent and 6.1 per cent respectively.

In the retail sector, the survey reported rents on Dublin’s Grafton Street grew by 17.9 per cent in 2015 and by 16.8 per cent for other prime Dublin rentals. Zone A values for retail in the capital reached €5,247 per sq m at the end of 2015.

“Respondents to the survey expect prime retail rents in Dublin to increase by 11.5 per cent in 2016. In Connacht/Ulster, they are expected to increase by around 4.5 per cent and in Munster and Leinster by 8 per cent and 7.2 per cent respectively,” the SCSI said.

Brian Meldon, SCSI commercial agency professional group chair, said retail rents had increased throughout 2015.

“However, demand in town centres, suburban areas and neighbourhood shopping centres remains subdued, and higher vacancy rates will likely remain a challenge within these areas in 2016, despite the positive forecasts for rental value growth,” Mr Meldon said.

Development finance remains the biggest single issue in ensuring additional new residential and commercial units are built over the short-term, the SCSI said.

“Many contractors are reportedly experiencing very limited access to finance, with lending of only 30-50 per cent being offered by financial institutions,” Mr Meldon said. “Ensuring the availability of development finance for measured speculative development, as well as speeding up the planning system will address supply issues and create a more sustainable market.”

Last year also saw recovery commence in the industrial market, according to the SCSI. While much of this was Dublin-centred, the Munster region experienced the highest growth in industrial rents.

Prime Dublin industrial rents of under 500sq m increased 2 per cent over 2015 to now stand at €84 per sq m while secondary rents on properties above 500sq m increased by a significant 34.1 per cent to €55 per sq m.