Another Steady Quarter Of Office Take-Up In Dublin Despite Economic Backdrop
- Office take-up of 32,027m2 achieved in Dublin during Q3, with some of the largest lettings in the quarter occurring in the suburbs
- 51 individual office lettings signed in Dublin in Q3, 18 of which were to Irish tenants
- The ten largest office lettings signed in Q3 accounted for almost 56% of take-up in the quarter between them. The remaining 44% of Q3 take-up occurred in 41 individual lettings
- The overall vacancy rate in the capital stands at 22.1% at the end of Q3 having increased slightly from 21.9% last quarter
- Prime headline quoting rents in Dublin city centre stable at approximately €296 per m2 for the third consecutive quarter
- No lettings of more than 4,645m2 (50,000 sq ft) signed in Dublin in any of the last four quarters
- Notable improvement in transactional activity in the investment sector over recent quarters
Dublin, October 7th 2012 – Property consultants CBRE today released their latest office statistics for the third quarter of 2012, showing that office take-up in the Irish capital was higher than expected in the last three month period. With many large office requirements having been put on hold or delayed by corporate occupiers as a result of global economic uncertainty over recent months, there was an expectation that annual office take-up in Dublin might only reach 100,000 square metres in 2012, compared to its long-term average of more than 150,000 square metres. However, a relatively healthy 32,027m2 of office lettings were signed in Dublin in the third quarter of 2012, ending another three month period when a large volume of smaller office lettings buoyed the market to some extent. There were 51 individual office lettings signed in the capital during Q3 2012, bringing the total volume of office take-up in the capital in the first nine months of 2012 to 86,867m2. According to Marie Hunt, Executive Director at CBRE, Ireland “While the volume of annual office take-up in the Irish capital in 2012 will be considerably less than the long-term average for the city, a year-end figure of 110,000m2 now seems the most likely outcome - an impressive result considering the economic backdrop domestically and internationally”.
The most significant office lettings to sign during Q3 2012 include the letting of 3,948m2 to Capita at Grand Canal Square in Dublin 4; the letting of 2,684m2 to SAP at Waterside in Citywest in the west suburbs and the letting of 2,330m2 to Tullow Oil in Number One Central Park in the south suburbs. The suburbs accounted for almost 44% of office take-up in Dublin during Q3 as a result of some of the larger transactions to sign during the three month period being located in the suburbs.
The overall office vacancy rate in Dublin at the end of Q3 2012 was 22.1%, up slightly from 21.9% last quarter with more than 796,000m2 of office accommodation being officially marketed to let in the Dublin market at the end of the third quarter of this year.
4 of the ten largest lettings in Q3 comprised companies expanding to larger premises; 3 were brand new requirements while the remaining 3 were companies relocating to alternative premises. 18 of the 51 lettings signed in Dublin in the third quarter of 2012 were to Irish companies accounting for 37% of the quarters letting activity between them. 9 lettings in Q3 were to US companies which accounted for 32% of office take-up in the quarter while 3 lettings to UK companies accounted for 13% of take-up.
Prime rents in the Dublin office market at the end of Q3 2012 were approximately €296 per square metre and have been stable at this level for 3 consecutive quarters now.
18,070m2 or 56% of overall office take-up in Dublin in Q3 occurred in the city centre with the suburbs accounting for the remaining 44% or 13,957m2 of lettings signed in Dublin in the period. Suburban take-up was boosted as a result of some of the larger office lettings signed in Q3 being located in the suburbs.
22% of the office take-up in Q3 comprised lettings of smaller than 465m2 (5,000 sq ft) in size. 19% of the quantum of accommodation let in the period comprised lettings that extended to between 465m2 and 929m2 (5,000 sq ft and 10,000 sq ft) in size. A further 24% of the volume of lettings signed in Q3 comprised lettings of between 929m2 and 1,858m2 (10,000 sq ft and 20,000 sq ft) in size while the remaining 34% of the quantum of office accommodation let occurred in lettings of between 1,858m2 and 4,645m2 (20,000 sq ft and 50,000 sq ft) in size. There were no lettings of more than 4,645m2 (50,000 sq ft) signed in Dublin during Q3 – the fourth quarter this has been the case.
Although there has been a complete lack of new office development in Dublin for the two years, older office buildings which are being vacated in favour of newer alternatives continue to be added back into the vacant stock. In addition, many companies are attempting to sublet or assign excess accommodation at present and this is maintaining the overall level of availability at relatively high levels despite the underlying level of letting activity. There was more than 796,000m2 of office accommodation being marketed to let in the capital at the end of Q3 2012, up slightly from 790,000m2 the previous quarter.
Tenants in the computers and high tech sector accounted for 27% of office lettings signed in Dublin during Q3 2012. The business services sector accounted for a further 25% of letting activity in the period. Tenants in the manufacturing, industry and energy sector accounted for a further 14% of Q3 letting activity in the capital while the financial services sector accounted for 15% of lettings signed in Dublin during Q3. The public sector accounted for only 2% of office take-up in Dublin during the third quarter of 2012.
Take-up of 18,070m2 was achieved in Dublin city centre during the third quarter of 2012, compared to 43,325m2 of lettings in this district in same quarter last year. There were 33 individual lettings signed in Dublin city centre in the three month period, 26 of which were located in the Dublin 2/4 district specifically. In total, 74% of the office take-up in Dublin city centre during Q3 2012 was located in the Dublin 2 and Dublin 4 postcodes which between them accounted for 42% of overall take-up in Dublin during Q3.
The value of office investment transactions of greater than €1 million completed during Q3 was €90.1 million, bringing the overall spend on office investments for the first three quarters of the year to €176.1 million. This equates to 64% of the overall investment spend of more than €270 million in the Irish market in the first nine months of 2012.
Office investment transactions that signed during Q3 2012 include the sale of four office buildings at AIB Bankcentre in Dublin 4 for approximately €70 million; the sale of Brooklawn House in Shelbourne Road in Dublin 4 for approximately €14.85 million and the sale of Beaver House in Beech Hill Office Campus in Clonskeagh, Dublin 14 for approximately €5.25 million.
There has clearly been a significant improvement in the volume of investment properties being offered for sale in the Irish market in the first nine months of 2012 with banks, receivers and NAMA all releasing more product for sale. This is now materialising into transactional activity with 18 investment transactions of more than €1 million in value signed in the first nine months of the year compared to only 8 investment transactions of more than €1 million signed in the Irish market in the entire year last year.
There are now firm signs of prime property values reaching a floor with prime rents and yields showing evidence of stabilisation. However, further slippage in rents and yields for secondary assets continue to impact performance numbers on an aggregate basis. Therefore, while according to the Investment Property Databank (IPD), total returns in the Irish investment market in the first half of 2012 were positive at 1.7%, capital values continued to decline in the period, albeit not as aggressively as in previous quarters. Average values are now down 66% from peak.
Prime office investment yields in Dublin are now in the order of 7.0% having strengthened slightly from 7.25% earlier in the year as a result of strenghening demand and the bids that investors are currently making on prime assets in the Irish capital.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 110 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.