More than 500,000 sq ft of office space was leased in Dublin in the first quarter of 2017, according to CBRE.
In total, 40 individual lettings occurred in Dublin, compared with 50 in the first three months of last year. There was one letting of more than 100,000 sq ft signed in the Dublin market in the first quarter of the year as well as another large transaction of up to 100,000 sq ft.
The volume of demand for office accommodation rose during Q1 and stood at more than 3m sq ft at the end of Q1, up from 2.79m sq ft at the end of last year. At the end of the period, 27% of requirements were focused on the Dublin 2/4 postcode.
There were 30 office schemes under construction in the city, totalling almost 4.4m sq ft. Of stock that is currently under construction, 21% has been prelet.
More than 2.3m sq ft of new office stock is due for completion in 2017, of which more than a quarter has been prelet.
Tenants in the tech sector accounted for 41% of the office deals signed. Public sector/regulatory bodies accounted for a further 36% of Q1 take-up, while business services tenants accounted for 10%. Of the 10 largest lettings completed, six were expansions and four were relocations.
Vacancy rates in Dublin rose in most districts but remain low, with the grade-A vacancy rate in Dublin 2/4 at just over 3%. The overall rate of vacancy in Dublin was approximately 7%.
The city centre accounted for 80% of office take-up in Dublin, with 27 individual lettings signed. Some 69% of that leasing activity occurred in the Dublin 2/4 district and a further 20% occurred in Dublin 1/3/7.
At the end of Q1, the vacancy rate in Dublin city centre was 5.4% and the vacancy rate in the Dublin 2/4 postcode area was 5.77%, with grade-A vacancy at just over 3%.
Out of town, there was less than 107,000 sq ft of office transactions signed in the Dublin suburbs in 13 individual transactions. This was down by more than 20% compared with Q1 in 2016, although CBRE said take-up would rise as leases are signed on suburban offices that are currently reserved.
Around 72% of lettings in the suburbs in Q1 occurred in the west suburbs, with 18% in the south suburbs and the remaining 10% in the north suburbs.
The vacancy rate in the suburbs stood at 9.69% and prime headline quoting rents in the south suburbs remain stable at €27.50 per sq ft at the end of Q1.
The value of office investment transactions extending to more than €1m completed in the Irish market was more than €197m, accounting for 40% of investment activity in the Irish market in the quarter. Almost €110m of mixed-use transactions (some of which included office properties) were also signed.
The largest office investment transactions to sign during Q1 2017 included the forward funding of 13-18 City Quay, Dublin 2; the sale of an office investment at Fumbally, Dublin 8; and Block P2, Eastpoint Business Park, Dublin 3.
Prime office yields in Dublin remain stable at approximately 4.65% but CBRE expects them to strengthen over the coming quarters. Investors remain specifically attracted to investment in the Dublin office sector considering the strength of underlying occupier activity, volume of demand and the pace at which new schemes are attracting tenants. CBRE expects this momentum to continue and offices to continue to perform well, particularly when compared with other European capitals.
Marie Hunt, executive director and head of research at CBRE in Ireland, said: “There has been continued press speculation in recent weeks about financial services occupiers focusing on the impact Brexit might have on their operations and looking at locating some jobs in locations such as Dublin.
“It is not clear at this juncture how big these requirements will ultimately be and what the likely timing for any move might be but it seems increasingly likely that Dublin will benefit to some degree. However, it is encouraging to see that the Dublin office market continues to perform well regardless of any additional demand that may materialise as a direct result of Brexit, with 20 of the 40 transactions signed in Q1 comprising indigenous occupiers and the vast majority of leasing transactions emanating from expansionary activity.”
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