Uncertain outlook for Dublin office market: CBRE

The office sector in Dublin witnessed healthy office take-up levels in the second quarter of 2010, but the medium to longer term outlook remains uncertain, according to the Q2 Dublin Office Market View Publication published by property adviser CB Richard Ellis.

Letting activity remained consistent in Q2 2010, with 24,652 m² of take-up recorded in the period, compared with 24,954 m² of lettings signed in the first three months of the year. This represents a 6% increase in take-up levels on an annual basis while recent quarterly take-up is more than double the level of quarterly letting activity achieved in the Dublin market in 2009. Total take-up in Dublin in the first half of the year amounted to almost 50,000 m².

In total, 35 individual office letting transactions were signed in Q2 2010, the majority (19) of which were lettings of 450m² or less. Only three lettings signed in the period extended to more than 1,858 m² in size.

Willie Dowling, Executive Director at CB Richard Ellis, commented: 'There has been an encouraging level of letting activity in the Dublin office market in recent months and we are on target to beat last year’s take-up level of 78,500 m². However, despite the fact that transactional activity in the Dublin office market has been holding up well over recent quarters and there is a good level of active requirements, the medium to longer term outlook still remains uncertain.' Further consolidation in the financial services sector was a real threat, he warned, while additional government austerity measures were giving cause for concern. 'The three vital ingredients for a properly functioning office market - meaningful job creation, rental growth and the availability of funding - are all unlikely to materialise for some time. In the interim, the office sector will remain primarily reliant on company expansions and relocations and with little net absorption occurring, vacancy rates will remain high.'

The combination of an uncertain economic outlook, high vacancy rates and constrained access to development finance mean that the start of the next development cycle in Dublin is still some considerable way off according to CBRE, which points out that after 2010, there are no new office schemes scheduled to be completed in the Dublin market.

The property consultants say that even through prime rents are stabilising and the economy is showing some signs of improvement, it will take some time for speculative development to resume, even if the availability of development finance improves. If developers (and those funding them) remain cautious and refuse to develop new schemes without first securing pre-lettings, this will ultimately have implications for occupiers.

'Despite the fact that there is a large amount of vacant office accommodation in the capital with the vacancy rate now at 23.5%, much of this comprises floors in part-occupied buildings, meaning the availability of new office buildings in the central business district will continue to decline over the course of the coming quarters as lettings continue to occur,' Dowling said.