Dublin office rents are holding steady as most other European office markets slip, according to a survey being released this week by UK-based CB Hillier Parker. The report also reveals that the EU index dropped for the first time since 1996 over the third quarter.

Following a buoyant first-half, Dublin rents have remained static for the third quarter of this year. Across the EU however, the average index of prime office rents fell for the first time in five years. The downturn in the global economy continues to have a big impact on the sector, with the level of take-up falling off sharply in most markets as slower demand from high-tech sectors and rising availability begins to take hold.

According to the third quarter EMEA Market Index Brief, compiled through an association of commercial agents across 40 locations in Europe, the Middle East and Africa (EMEA), Dublin prime office rents are still increasing on an annual basis, with rents 2.7 per cent higher than this period last year.

Rents in the traditional core of Dublin 2 and 4 are currently averaging around £38.50 (€48.88) per sq ft, making Dublin the eighth most expensive office location surveyed.

Rents fell in 13 of the 40 cities surveyed for the report, with another 22 locations remaining static - but despite the doom-and-gloom economic reports, rents rose in five prime locations. The cities which experienced rent increases were Barcelona, Harare, the City in London, Manchester and Moscow.

Commenting on the report, Brian Turner, head of research at Hamilton Osborne King (the Dublin associate of CB Hillier) said: "The effects of the global economic slowdown are now beginning to be seen in the office markets across Europe. Slower demand from tenants has led to rental falls in a number of locations. The level of take-up in most markets has fallen off sharply, and availability is rising. A large amount of space is available to sublet, as companies rationalise or take delivery of pre-let space for which they no longer have a requirement."

This is a situation that is likely to continue in the short-term, he added, but should begin to improve as the global economies recover towards the end of next year.

The sharpest rental falls were experienced in Istanbul, which was down 25 per cent, and Tel Aviv, which decreased by 10.5 per cent. Harare topped the table with growth up 22.7 per cent. London's West End remains the most expensive office location in the region, followed by London City, Paris and Zurich.

"Relative to some other European office locations, however, Dublin is holding its ground quite well. Headline rents of £38.50 (€48.88) per sq ft per annum are still being achieved, as exemplified by the recent letting in George's Quay to Pioneer Investment Management. However, in some cases, more so in the suburbs than the city centre, lease terms are beginning to ease and incentives - such as rent-free periods - are increasing."

Since the beginning of this year, the vacancy rate has risen to approximately 7 per cent, which some consider high compared to what Dublin was used to in recent years, but is actually a normal level for most markets.

Turner also observed that investors are becoming more selective and the market more conservative, as reflected in rising yields in the Dublin market. A number of developments that were expected to come on stream over the next year and a half have been put back and lenders are becoming more cautious. "This will benefit the longer-term stability of the market," he said.