Dublin office vacancy fell for the first time in two years during Q1 2010

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 10,500 sq m of new office completions in Q1 2010. This leaves a further 80,000 sq m 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 32,000 sq m 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.