PRIME office rents in Dublin are in the mid-table range compared with her European cities, according to a survey by ONCOR International, the worldwide real estate organisation. Dublin is ahead of Copenhagen, Madrid and Amsterdam, with Brussels, the headquarters of the EU, at the bottom of the scale at £12 per square foot. Moscow is the most expensive place to lease offices because it is a relatively new entrant in the office letting market.

Dublin's position on the table reflects the buoyancy of the rental market over the past few years. The growth in rents is in sharp contrast to most European cities, where markets are depressed and rents have been on a downward track. This is borne out by the fact that London and Dublin were the only two cities where office rentals increased significantly last year.

The league table for offices outside the central business district, (office parks, suburban areas), shows Dublin again in the middle of the table, ahead of Frankfurt, Brussels and Amsterdam.

Looking at the office vacancy rate in European cities, Dublin is at the lower end of the scale at 2.7 per cent for buildings above 20,000 square feet (4 per cent overall). The Moscow rate is distorted because of the small volume of space available but the woes of the European market are clearly visible - the vacancy rates for the other major cities in Europe are all between 7 per cent and 10 per cent.

With a limited amount of new buildings coming on stream this year (800,000 square feet), the outlook is for rents to further increase in Dublin to between £17 and £18 per square foot. This is good news for developers and investors - but it does pose some serious questions about Dublin's competitiveness in the international market.

With a higher and higher percentage of space being taken up by international company particularly from the US no country or city can isolate it from international competition. Dublin remains ahead of its competitors such as Amsterdam, Copenhagen and provincial cities in the UK, the Dublin office market is in danger of losing out to other, more cost-competitive locations particularly when our current advantages of good labour availability and tax incentives start to disappear - as they will.

On the other hand it could be argued that European rents will emerge from the recession and overtake Dublin in the next two to three years while Dublin rents will appreciate at a lower rate.

It does, however, highlight the down side of too rapid-a-rise in office rents in Dublin, and of the necessity for the market not to appreciate at an unsustainable rate.

A more fundamental question is why rents are higher in Dublin compared with other cities. Sites have always been expensive in Dublin's central business district due to restrictive planning laws, so this may be a partial explanation.

However, building costs in Ireland are competitive compared with most other European cities. The reason must, therefore, be largely due to the high level of demand and scarce supply.

While the buoyancy of the market is cause for celebration at present, it may result in some unfortunate consequences downstream.

The internationalisation of markets means that your competition is not the building across the street but buildings in other cites in Europe or indeed the world.