Dublin office market healthy despite economic clouds, CBRE

Occupier activity in the Dublin office market remains healthy, irrespective of economic conditions or funding issues, according to property consultants CBRE. The latest research by the company found that over 45,000m² of letting activity was signed in Q1 2008 which is 10% higher than the five-year average for Q1. The research also noted that a number of large pre-lettings are due to sign next quarter.

The research showed there was demand for as much as 345,000m² of office accommodation in Dublin at the end of Q1 2008, which equates to more than twice 10-year average take-up levels in the capital. The consultants also found that occupiers were increasingly focussed city centre locations, with a notable decline in demand for suburban properties.

Although almost 70 office lettings were signed in Dublin since the beginning of the year, CBRE also found that letting transactions were taking longer to complete and occupiers were proceeding cautiously. The company said that a positive outcome of the debt crisis was that the restricted funding environment was likely to prevent oversupply.

Marie Hunt, director of research at CB Richard Ellis, commented: ‘New office developments that have not yet broken ground could potentially be put on hold given the current market environment. More rigorous assessment of new office schemes is a welcome outcome of the current funding crisis as this will ultimately prevent oversupply and sustain rental values, even if occupier demand starts to ease.’

Investment transactions have suffered as a result of lack of funding, however. The report noted that only five investment transactions were signed in Q1 2008. Total investment spend in the first quarter of the year was only EUR 235mln.

Also in line with trends being witnessed in many European capitals, prime rents in the Dublin office market have stabilised. Prime quoting rents in Dublin city centre have remained stable at approximately EUR 673 per m² in recent quarters. Prime office yields have shifted by 25 basis points to approximately 4.0% since the beginning of the year. Given the relative balance between supply and demand, however CBRE believe prime rents in the Dublin city centre market are unlikely to decline in 2008.