Although Irish office take up fell early this year, two separate reports are predicting an “exceptional busy summer” as the country’s commercial sector continues to strengthen.
According to a new Jones Lang LaSalle (JLL) survey, just 340,000 sq ft of office space was let across Ireland during the first quarter of the year — around a third of the million square feet let during the final quarter of 2014.
The property services provider blames the exceptionally high number of deals in the preceding three months, which it says would have been hard to match, and admits that the first quarter of any year is traditionally slow.
JLL says five deals larger than 20,000 sq ft were closed between January and March, with the average floor plate size also smaller than previous quarters at an average 7,500 sq ft. For the first time in several years, out-of-town locations were more popular than city centre sites. Over 55 per cent of space taken up was located outside Ireland’s major cities.
Continuing last year’s predictions, the firm warns that the lack of Grade A space in the centre of Dublin is now critical. “The 2.6 per cent vacancy rate for top quality space in Dublin city centre means the vacancy rate is now effectively zero,” said JLL.
“In that climate, it is not surprise that the market is very much in landlords’ favour. New leases now tend to be close to 25 years, rather than the 10 of 15 years that had been in favour since the crash,” it added, pointing out that “favourable break clauses have all but disappeared”.
Meanwhile, CBRE Ireland claims the upturn is already underway as activity “continued to at pace” in the commercial property market during March and April with all the indications pointing to “another high volume summer”.
The author of the agency’s May bi-monthly report, Marie Hunt, says: “A considerable volume of assets and loan portfolios are being prepared for sale with up to €500m (£370m) of investment assets due to be formally launched for sale in the coming weeks and loan portfolios with a face value of up to €15bn (£12bn) expected to be brought to the market over the coming months.”
The executive director and head of research at CBRE Ireland, added that demand for investment properties remains strong with several new entrants continuing to emerge. “Activity in the occupier markets also shows signs of rental growth now emerging in the retail and industrial sectors having been evident in the office sector for some time.”
And echoing JLL’s prediction that out-of-town locations were becoming increasingly attractive, Hunt said: “Despite much heralded shortages of Grade A accommodation in Dublin’s central business district, there is availability in other locations, particularly for small to medium sized requirements … We are increasingly seeing occupiers opting to rent premises in more outlying locations of the city and in the suburbs.”
There are currently five new office block projects, each in excess of 600,000 sq ft, underway in Dublin. “While there is a lot of additional office stock due to become available in the city centre from 2017 onwards,” concludes Hunt, “in the intervening period, scarcities will remain in prime locations which, in turn, will continue to drive rental values higher.”
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