Monday, 23 February 2015
HWBC forecasts 33% rental growth in Dublin prime office by the end of 2016 (IE)
Rent levels for office space in the prime Dublin office market are expected rise by 20% this year and a further 9% in 2016, according to HWBC’s Office Market Review released today.
The review shows that rates for prime Grade A offices in Dublin City Centre rose 30% in 2014 to finish at €45 per ft² (€485 per m²), and will reach as high as €60 per ft² (€645 m²) by December 2016. The continued rapid increase in rents is due to the fact that no new offices have been built in the past 5 years and there will be no significant completions in Dublin until well into 2016.
Tony Waters, Investment Director at HWBC said: “The simple fact is that the economy is improving, further foreign investment is coming to Dublin and yet we have no new office supply. As occupiers compete to lease the best locations it is inevitable that rents will continue to be driven higher. We are forecasting 20% rental growth this year, with some moderation in 2016 as new schemes start to come on stream
The success of the IDA in attracting new FDI clients and expansion of existing companies like Twitter and Facebook is playing a major role in driving the market higher. It is a good problem for the economy to have, but what we need now is further investment in development so that demand can be catered for at reasonable rent levels.”
HWBC’s report shows that there is just 45,000 m² of office space under construction relative to a total take up of 220,000 m² in 2014. The former Canada House on St Stephen’s Green will provide 6,000 m² and the former Bank of Ireland building on Baggot Street will provide up to 20,000 m² on a phased basis, but there will not be enough to bridge the “supply gap” in 2015.
Last year also saw the rise in city center rates feed through into suburban locations, with Dublin suburb rental rates up 42% to €25 per ft² by December 2014. Even in areas of legacy over-development like Sandyford & Leopardstown rents are showing gains.
The rising market is also being seen in the rental value of car parking spaces, with a city space now yielding an estimated €3,000 per annum, up 9% since last year and expected to rise a further 17% in 2015. The recent acquisition of 28 spaces by law firm Arthur Cox for a reported €1.7m is evidence of the value being place on prime parking locations. Even in Dublin suburbs parking spaces are estimated to be offering an annual rental yield of €1,500 per space.
The vacancy rate at the end of December stood at 12.75%, compared to the peak rate of 22.8% in 2010. The average deal size for new leases this year was 1,100 m² with 199 transactions taking place over the past 12 months.