Quarter 2 Take-Up Not Representative Of Underlying Activity In The Dublin Office Market
Dublin, 17th July 2016 – Commercial property consultants CBRE Ireland today released their latest Market View report looking at trends in the Dublin office market in the second quarter of 2016. According to CBRE, a total of 37,199m2 of office leasing activity in 65 individual lettings occured in the capital during the second quarter of 2016, bringing total office take-up in the first half of 2016 to almost 90,000m2. Although this is down 35% on the same period last year it follows a bumper Q2 in 2015 and masks a number of large deals whcih are currently underway and due to sign in Q3. There was only 1 large letting in excess of 4,645m2 (50,000 sq. ft.) signed in Dublin during Q2, namely a letting of 4,052m2 to United Health Group at Block C, Spencer Dock, Dublin 1.
Although it remains to be seen to what extent the Brexit result will impact on demand for office accommodation in the capital in the medium term, the overall volume of demand for offices rose quarter-on-quarter to 247,000m2 at the end of Q2. 38% of requirements at the end of Q2 2016 were specifically focussed on the Dublin 2/4 postcode with the south suburbs accounting for a further 23%.
Tenants in the computer and high-tech sector accounted for 13% of office transactions signed in Dublin during Q2 2016 and 25% of overall take-up in the first six months of the year. Financial services tenants accounted for 19% of Q2 take-up and 20% of H1 take-up while business services tenants accounted for 12% of leasing activity in Dublin in the last three month period and 9% of leasing in the capital in the first half of the year. 2 of the ten largest lettings completed in Dublin during Q2 2016 were expansions, 5 were relocations while 3 of the ten largest office lettings in Dublin in the quarter was to a new entrant.
The city centre accounted for 84% or 31,228m2 of take-up in Q2, bringing city centre take-up in the first half of 2016 to 70,983m2. There were 52 individual lettings signed in Dublin city centre during Q2 meaning a total of 88 lettings have been signed in this district in the last six months. 56% of office take-up in Dublin city centre in Q2 and 58% of H1 take-up in this location occurred in the Dublin 2/4 district specifically. In contrast, there were 5,972m2 of office transactions signed in the Dublin suburbs in Q2 2016 in 13 individual transactions, bringing suburban take-up in the first six months of the year to 18,659m2. 69% of the activity occurring in the south suburbs in Q2 occurred in the south suburbs, 18% in the north suburbs and the remaining 13% occurring in the west suburbs.
Vacancy rates in Dublin fell in Q2 2016 with the Grade A vacancy rate in Dublin 2/4 at approximately 2.4% at the end of Q2. Meanwhile, the overall rate of vacancy in Dublin is now 8.36%.
According to CBRE, potential occupiers are obtaining better terms for refurbished accommodation as opposed to new buildings in the current climate, which is easing rental pressures to some degree. Indeed, while prime headline rental values of €638 per square metre (€60 per sq. ft.) are now being quoted for a number of buildings in the Central Business District, there is no firm evidence as yet of this rental level being achieved and as a result CBRE have left their prime rent series unchanged at €619 per square metre (€57.50 per sq. ft.) at the mid-year point.
At the end of Q2, there are 27 office schemes under construction in the capital, extending to almost 345,000m2 between them (take-up in Dublin last year was 235,000m2) . 22% of this stock that is under construction has already been pre-let with negotiations continuing on other buildings. As result of planning and funding delays, at this stage, it appears that several schemes that originally had target completion dates of 2018 will now not be completed until 2019 or beyond so supply is well controlled.
CBRE say that prime office investment yields remained stable during the quarter at 4.65%. The total volume of office properties purchased for investment in Dublin in the quarter reached more than €691 million with several notable deals including the acquisition of the PWC headquarters in Dublin Docklands for €242 million completed in the quarter.
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 and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. 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 165 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, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.