DUBLIN OFFICE VACANCY FELL FOR THE FIRST TIME IN TWO YEARS DURING Q1 2010
According to the Dublin Office Market View Q1 2010 from property consultants CB Richard Ellis, vacancy in the Dublin office market fell for the first time since early 2008 in Q1 2010 as office take-up continued to rise and the supply pipeline remained constrained. According to CB Richard Ellis, the overall Dublin office vacancy rate fell slightly from 23.45% to 23% in Q1 2010. While vacancy rates differ across sub-markets in Dublin and the overall rate remains high compared to other similar European markets, CB Richard Ellis says that it is encouraging to see some reduction in the vacancy rate. However, they say it remains to be seen whether this downward movement is indicative of a trend considering the fact that many occupiers are vacating older accommodation in order to move to new premises.
The reduction in the vacancy rate is at least partly due to continued (but tentative) recovery in the level of office letting activity in the city. The data compiled by the research team at CB Richard Ellis suggests that the Dublin office market saw nearly 25,000m2 of take-up during Q1 2010, a quarterly increase of 26%. This compares with the first quarter of last year, when this sector bottomed and take-up reached just over 10,284m2.
Willie Dowling, Director of Office Agency at CB Richard Ellis Dublin, said: “Although a number of large requirements have emerged in recent months, letting activity in the first quarter of 2010 was primarily characterised by smaller lettings, with 19 of the 36 lettings signed during Q1 2010 extending to less than 450m2 in size. There were several larger lettings completed in the last three months as well, however, with two of the largest lettings signed in the last three months occurring in the suburbs and accounting for more than 8,000m2 of total take-up between them. We expect take-up this year to be at least at the level seen last year – around 78,000m2 - and based on the recovering demand seen in the form of new requirements for office accommodation activated over the past several months, we are confident in that prediction. ”.
Patrick Koucheravy, Property Economist at CB Richard Ellis Dublin, said: “The reduction in the overall vacancy rate and the changing character of Dublin’s vacant office stock is as a result of several underlying trends: first, existing occupiers are exercising break options, leaving older stock behind and moving into new, Grade A accommodation; second, new entrants to the Dublin office market accounted for 43% of take-up in Q1, removing more than 10,600m2 of vacant stock from the market; third, a considerable amount of stock under construction is pre-let and will not enter the vacancy calculation. We expect further stabilisation or improvements in the vacancy situation over the next several months, if take-up continues at the current levels, but the vacant stock that remains will increasingly be older and located in less-desirable office districts.”
CB Richard Ellis say that while prime quoting rents in the office sector are stable at present, there is real potential for a two tier market to emerge in Dublin, with rents for prime modern accommodation in the best locations starting to edge upwards while rents for secondary accommodation remain under further downward pressure.
The CB Richard Ellis report confirms that Dublin city centre remains the focus of both take-up and demand in the office sector. Indeed, the city centre accounted for 53% of overall office take-up in the first three months of the year according to the property consultants, accounting for 24 of the 36 lettings signed in Q1. Lettings to hi-tech and computer services tenants accounted for the largest single proportion of take-up in Dublin in the period, accounting for 8,715m2 of office lettings signed. The manufacturing & industrial sector, which has not been highly active in the office market in recent quarters, accounted for 23% of take-up in Dublin during Q1, while business services tenants accounted for 28%.
The report also says that the supply pipeline remains severely constrained, with only 10,500m2 of new office completions in Q1 2010. This leaves a further 80,000m2 of office stock under construction and due for completion by the end of 2010, although CB Richard Ellis point out in the report that more than a third of the new supply for 2010 is already pre-let. There is currently more than 32,000m2 of space under construction and scheduled for completion in 2011. Beyond what is currently under construction, CB Richard Ellis say it is difficult to envisage significant additions to Dublin’s office stock in the current environment.
The new report highlights that prime office rents and prime office yields in Dublin remained stable in Q1 2010, with rents down 44% and office yields having moved 375 basis points from peak. This has attracted the attention of international occupiers and investors alike, and although the investment market has not seen an office investment transaction being completed since early 2009, there is growing investor interest so this trend is expected to change over the coming months according to CB Richard Ellis.
Director – Research Department
CB Richard Ellis
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CB Richard Ellis
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About CB Richard Ellis
CB Richard Ellis 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 2008 revenue). The Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis 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. CB Richard Ellis has been named a BusinessWeek 50 “best in class” company three years in a row and a Fortune 100 fastest growing company two years in a row. Please visit our Web site at www.cbre.com. In Ireland, CB Richard Ellis 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, project management, consultancy, valuations and research. CB Richard Ellis Ireland has been listed among the top 50 Best Workplaces in Ireland, 2010, for the sixth year running. Please visit our website at www.cbre.ie