Offices continue to be the best performing sector in Ireland, but lack of supply in central Dublin is hiking up rents and driving occupiers out to Docklands and the suburbs.
Gunne Research’s latest Dublin Office Bulletin says vacancy rates currently stand at 2% for this year’s first quarter.
Schemes in the development pipeline are mostly prelet, and Gunne predicts the vacancy rate will remain low for at least the next two years. The prelet market accounted for 62% of take-up figures.
Prime yields for office investment are currently 4.75% with IR£61.5m invested in the office sector so far this year. Yields have remained stable, with the rise in interest rates countered by ongoing rental growth.
Gunne predicts supply will increase substantially next year, easing the pressure on higher rents. Average prime rents continue to rise and hover around £366 per sq m (£34 per sq ft), although two recent deals have pushed headline rents up to £387.50 per sq m (£36 per sq ft).
City centre rents have the greatest increases while suburban rents should stabilise in 2000 as supply increases.
Dublin still remains a cheaper option than competing centres such as London, Manchester, Glasgow, Frankfurt, Leeds, Birmingham and Edinburgh. The reduction of corporation tax to 12.5% continues to attract demand from overseas investors.
In this year’s first quarter, the business/services sectors took 45% of office stock, compared to 33% by the financial services sector. IT companies accounted for12% of the total take-up in the same period.
EGi News 13/04/00
