Dublin office market shows signs of weakening

Office occupier demand is weakening on the back of deteriorating economic conditions, which could impact on office letting activity in the capital in 2009, according to a survey by property consultants CB Richard Ellis (CBRE) published on Wednesday. The finding was issued despite good letting activity and a number of large lettings currently under negotiation in the office market.

According to CBRE's Dublin Office View publication for the second quarter of 2008, the Dublin office market performed surprisingly well in the last three months with 33,030 m² of office lettings signed during the second quarter. The total take-up in the first six months of the year is almost 80,000 m². However, the consultants believe that sentiment has deteriorated in recent months as a direct consequence of economic conditions (both global and domestic). As a result, CBRE now expect office demand to ease in the second half of the year which will lead to weaker letting activity in 2009.

The survey also found a slight increase in the overall vacancy rate in the Dublin office market from 11.4% in the first quarter to 11.6% in the second quarter. The vacancy rate in the south suburbs however decreased in the second quarter from 9.2% to 8.7% quarter-on-quarter while the city centre vacancy rate remained stable. The consultants noted that while lease negotiations have become very protracted and lease inducements have undoubtedly increased in recent months, as yet, there are no signs of prime rents decreasing in the Dublin market. However, the report found prime office yields in Dublin increased by an average of 100 basis points since the beginning of the year from 3.75% to 4.75%.