Property consultants CB Richard Ellis has released their latest research report analysing activity in the Dublin office market in the first nine months of 2007 which further demonstrates the fact that the commercial occupier markets are performing completely out of synch with the residential sector at present. The report shows that over 200,000 m² of office accommodation has been signed in Dublin in the first nine months of 2007 alone, in a market where the ten-year annual average take-up has been 155,000 m² per annum.
A total of 80,190 m² of office lettings were signed in Dublin during Q3 2007 compared to just over 60,000 m² let in the same quarter in 2006. According to James Mullhall, Director of Office Agency at CB Richard Ellis, "2007 looks set to go down as the strongest year on record in terms of letting activity in the Dublin office market with demand buoyed by relocation and expansion plans of both domestic and international occupiers".
More than two thirds of the office lettings signed in Dublin during Q3 2007 were located in the city center. 41% of the 80,190 m² of office letting activity completed in Dublin in the last three months was located in the Dublin 1/3/7 district, boosted significantly by the fact that Anglo Irish Bank signed a pre-letting for more than 20,000 m² of accommodation at the Brooks Thomas site on North Wall Quay in Dublin Docklands this quarter. 67% of office take-up in the Dublin market during Q3 2007 was located in the city center region, with the other 33% located in the suburbs. Interestingly, 35% of letting activity signed in the last three months comprised pre-lettings of buildings, which are not yet built. The overall vacancy rate in the capital is still in double digits at 10.2% although the vacancy rate in Dublin city centre is much more favourable at 5.5%.
Interestingly, the top five lettings signed in Dublin in the last three months were all to financial tenants. However, if you consider the breakdown of letting activity for the first nine months of 2007 cumulatively, as opposed to looking at particular quarters in isolation, the picture is different. 41% of lettings in the year to September 2007 were to business services occupiers, 32% were to financial firms and 9% were to IT companies and public sector tenants respectively proving that the Dublin market is not overly-reliant on any particular tenant type.
The south suburbs of Dublin have been a major beneficiary of the general uplift in letting activity witnessed in Dublin in the first nine months of 2007. In total, over 17,510 m² of accommodation has been let in this district in the last three months of the year, equating to 65% of all suburban letting activity in Dublin in the quarter. Only 10 of the 62 office lettings signed in Dublin during Q3 2007 were located in the north or west suburbs, which highlights the fact that the majority of office occupiers still have a preference for city center or south suburban locations, where transport infrastructure is superior.
CB Richard Ellis state that there is clear evidence that prime office rents in Dublin, having risen sharply in the year to June 2007, have remained relatively stable in the last three month period. They say that while prime headline rents in the order of 673 p/m² are being achieved on small lettings in prime locations in the capital, occupiers with larger requirements are continuing to negotiate more favourable terms and conditions.
According to CB Richard Ellis, investment activity in the Dublin office market remains strong. According to Marie Hunt, Director of Research at the property consultancy, "Irish investors are encouraged by the fact that prime office yields in Dublin have remained steady at 3.75% since the beginning of 2007 at a time when there is evidence of yields in some sectors and locations starting to soften as investors re-price risk against a backdrop of uncertain conditions in global financial markets. We are confident that even if secondary properties suffer some slippage in yield in the medium term, prime properties