Davy Stockbrokers have claimed that office rents are set to go as high as €50 per square foot in what amounts to one of the most bullish calls on the future of the Dublin commercial property market in recent history.
According to the broker’s most recent report on the sector, rents can jump 40 per cent on current levels, as the market experiences a comeback.
There has been little commercial construction since 2010, but the increase in values and fundamentals now supports new projects and with the near-term supply likely to be constrained, the broker believes that rents are likely to soar.
Most analysts have been predicting rents to hit the €40 per sq ft mark this year, but the €50 level, or any figure close to that, has not been mentioned as a short-term target. Along with the short-term spike in rents, Davy expects volume levels to stay strong and points to the nearly €32bn of real estate-backed debt that is designated for disposal.
Prime Dublin yields have dropped from 7.5 per cent two years ago to 5.75 per cent currently. Capital values have appreciated 25-40 per cent since September of 2012.
Office take-up in 2013 was 1.8m square feet, the highest figure since 2007. Rents for prime office space are up 27 per cent since hitting bottom in 2012. The overall vacancy rate is 15.33 per cent, but it is 4.5 per cent for Grade A space in the city core.
For investors who are hoping to get into the commercial market, Davy points to the growing REIT market as a potentially useful entrance point.
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