Vacancy rate falling in Dublin office market as take-up rises by 60%

Agents HWBC predict that take-up of office space for the remainder of the year will comfortably exceed last year's total. JACK FAGANreports

THE VACANCY rate in the Dublin office market has peaked and will continue to fall over the coming months, according to the latest market review from estate agents HWBC. The agent’s office specialist, Paul Scannell, said that despite the economic backdrop the take-up in the first half of the year reached 85,850sq m (921,763sq ft)– an increase of 60 per cent on the same period last year.

There were, however, two unusually large lettings involving Google (19,500sq m /209,896sq ft) and bookmaker Paddy Power (11,150sq m/120,017sq ft) which accounted for more than 35 per cent of the total take take up.

Overall, activity was up by 66 transactions recorded in the first six months, with the average deal size at around 1,300sq m (13,993sq ft). For the remainder of the year, HWBC predicted that take-up was likely to comfortably exceed last year’s total of 120,000sq m (1,291,668sq ft) and should be closer to 140,000sq m (1,506,946sq ft) with over 25,000sq m (269,098sq ft)already reserved for Q3.

The agency said this level of activity represented a healthy bounce back from the lows of 2009 and was moving back towards the 15-year average of around 170,000sq m (1,829,863sq ft). In spite of the return to some form of normality, there had been a huge wipe-out in capital and rental values, with falls of 50 and 60 per cent recorded in the past two years affecting stakeholders in the industry. Prime rents had fallen slightly to €350 per sq m.

With the supply pipeline switched off and a reduced volume of “grey space” being released to the market, the vacancy rate would continue to fall. There were a number of large tenants in the market actively looking for space which would eventually put some pressure on supply at the top end of the market, particularly in Dublin 2 and 4. Once this happened rental values should start to recover from the current lows.

HWBC has calculated that the current vacancy rate in Dublin stands at 21.5 per cent but said this figure is distorted by the huge volumes of older stock overhanging the market which was difficult to let and in some cases considered virtually obsolete.

The agency estimates that the 223,000sq m (2,394,328sq ft) of Grade A space available represented three years supply at current take-up rates.

While there was no shortage of top quality stock for those looking for under 1,000sq m (10,737sq ft) or for larger occupiers seeking more than 5,000sq m (53,685sq ft) the choice was more limited in Dublin 2 and 4.

HWBC said that so far this year tenants had shown an overwhelming preference for modern space. Fewer than 15 per cent of new occupiers opted for second generation accommodation.

The value now available for good quality offices in town was influencing tenant take-up patterns with more than 75 per cent of deals this year in the central business district.

The gap between rents for office space in the suburbs and more established Dublin 1, 2 and 4 locations had narrowed sharply, allowing companies the option to remain in the city and still make considerable savings on occupational costs.