Demand for offices in Dublin continued to strengthen, with office take-up in Q1-Q3 2015 increasing by 26% year-on-year to total 1.73 million sq ft.
As with previous years, the TMT sector led occupier activity, accounting for 43% of take-up during the first nine months of the year, followed by growing activity involving the financial services sector – the top five deals in Q1-Q3 2015 have all been from these sectors, signifying their active presence in the market.
Full-year take-up is expected to just fall short of levels achieved last year, predominantly because office availability is at very low levels. However, following many years of no construction activity, the development pipeline for 2016 looks promising, with at least 500,000 sq ft due to enter the market during the second half of the year.
Dublin continues to outperform most of Europe, with rents rising at an accelerated speed, and vacancy rates falling rapidly. As at Q3, prime office rents in the city stood at €55 per sq ft per annum, up 22% on the same period last year – rents in Dublin grew the second fastest of the European capital cities, behind only Madrid.
The recovery of Ireland economy has played an important role in the uplift of the country’s real estate markets – GDP growth figures for 2015 have been revised upward to 6.0%, following an increase in domestic demand. Reflecting this positive market sentiment, commercial property investment in the country is forecast to reach €3 billion by the end of the year, boosted by many pending office and retail deals that are expected to close by the year-end.
Declan O’Reilly, Director, Knight Frank Ireland commented: “While some of the Reit’s and Irish Pension Funds have the ability to develop from their own resources the lack of funding for speculative development will ensure that Dublin avoids the potential for “over supply” over the next few years. Also it should be noted that even though rents have grown considerably over the last 24 months, they are still only getting back to where they were about 10 years ago.”
Heena Kerai, International Research Analyst at Knight Frank, commented: “As the economy continues to strengthen, the volume of development proposals gaining planning permission or starting construction has risen, which is much needed in this market. Consequently, many tenants will be interested in pre-leasing space as office availability throughout the city continues to diminish, which could help increase take-up levels for next year.”