Dublin Grade A office demand will outstrip supply
07 July 2011
Savills latest research data highlights that Dublin office market activity in the first half of the year is showing a more pronounced split between prime and secondary locations. This, the international real estate advisor suggests, will result in a lack of new Grade A space in prime locations as demand outstrips available supply with completions of Grade A stock dropping to the lowest level since 1985.
Roland O’Connell, Director of Offices at Savills comments: “The outlook for the office market is positive given current tough economic conditions. We expect that demand will focus on prime central locations and on new space in well-located suburbs.”
According to Savills, rents for space in prime locations have stabilized at close to €350 per sq m/per annum. However, secondary rents will remain under pressure throughout 2011 and into 2012 due to higher vacancy rates in less prime locations and the deals available for more prime locations.
Joan Henry, Head of Research at Savills Ireland, adds: "Office take-up remains steady so far in 2011 with just under 80,000 sq m of space let in the first six months of the year. This is 43% higher than for the same period in 2010, but consistent with take up in the second half of last year when market activity showed a clear sign of picking up. Prime locations dominate, with 62% of the take-up in Q2 in Dublin 2&4 combined."
Dublin’s office vacancy rate has increased in the second quarter and currently stands at 23.9%. The increase results from older space coming to the market in recent months and a surplus of new space that was completed but not let at the peak of the market. Vacancy rates vary significantly across the city - the North suburbs record the highest vacancy rate of 45% while the IFSC has a rate closer to 10% - level and quality of stock varies considerably by area. In terms of overall office supply, completions are at the lowest level since pre 1985, with only 12,500 sq m of new office space completed in Dublin in 2011 and no addition space set to be brought to the market in 2011.
O’Connell continues: "The fact that the pipeline for the construction of new office space has dried up means that the quality of space available, particularly in the prime locations will continue to diminish in particular in the centre of Dublin. This we expect will drive recovery in the market as the demand for grade A space is expected to remain consistent, as has been the case over the last twelve months, driven particularly by the high-tech sector."
For further information, please contact:
Roland O’Connell, Savills Ireland, +353 1 6181315
Joan Henry, Savills research Ireland, +353 87 6875066
Victoria Buchanan, Savills press office, +44 (0) 20 7409 8940
Savills Margaret Street
Savills Dublin Commercial
+353 (0) 1 618 1315