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More than 150,000m² of office leasing transactions signed in the Dublin market in H1 2017

More than 150,000m² of office leasing transactions were signed in the Dublin market in the first half of 2017, with two thirds of this leasing activity having been signed in the second quarter. The volume of leasing activity recorded in the first half of 2017 is really exceptional and is 68% higher than the volume of leasing activity recorded in the same period in 2016.
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CBRE
Dublin


In total, 81 individual lettings occurred in Dublin in the second quarter of 2017 compared to 40 in the first three months of the year. There were 3 lettings of more than 9,290m² (100,000 sq. ft.) signed in the Dublin market in the last three months as well as two other large transactions that extended to between 4,645m² - 9,290m² (50,000 – 100,000 sq. ft.). In addition to leasing transactions signed in the quarter, there was an additional 90,766m² of office accommodation reserved in the capital at the mid-year point, which bodes well for leasing activity volumes over the coming months.

On the back of the volume of leasing activity signed in the first half of the year, the volume of demand for office accommodation fell slightly quarter-on-quarter standing at more than 250,000m² at the end of Q2 compared to 280,000m² at the end of the first quarter. 16% of requirements at the end of Q2 2017 are specifically focussed on the Dublin 2/4 postcode. At the end of Q2, there were 33 office schemes under construction in the city extending to more than 420,000m² between them. 23% of the total office stock that is currently under construction has already been pre-let while 35% of the stock that is due for completion in 2017 has now been pre-let.

Tenants in the computer and high-tech sector accounted for 40% of office transactions signed in Dublin during Q2 2017. Financial services tenants accounted for a further 30% of Q2 take-up while business services tenants accounted for 11% of leasing activity in Dublin in the quarter.

5 of the ten largest lettings completed in Dublin during Q2 2017 were expansions while 4 were relocations. 1 of the Top 10 lettings in Q2 was to a new entrant. Vacancy rates in Dublin fell in Q2 2017 with the Grade A vacancy rate in Dublin 2/4 at just over 2.0% at the mid-year point versus 3.0% at the end of Q1 2017.

City Centre

The city centre accounted for 74% or 75,228m² of office take-up in Dublin in Q2. There were 56 individual lettings signed in Dublin city centre during Q2. 61% of office take-up in Dublin city centre in Q2 occurred in the Dublin 2/4 district specifically with a further 28% of city centre take-up occurring in Dublin 1/3/7.

At the end of Q2 2017, the vacancy rate in Dublin city centre was 4.6% vs 5.4% last quarter. Meanwhile, the vacancy rate in the Dublin 2/4 postcode at the end of Q2 2017 was 5.0% compared to 5.77% three months ago.

The Grade A vacancy rate in the Dublin 2/4 district at the end of Q2 2017 was just over 2.0% compared to just over 3% last quarter.

Computer/high-tech occupiers accounted for 50% of office take-up in Dublin city centre in Q2 2017. Meanwhile, financial services tenants accounted for 19% of city centre take-up in Q2, while business services occupiers accounted for 13% of city centre take-up in Q2. Prime rents in the city centre remained stable at €673 per square metre (€62.50 per sq. ft.) at the mid-year point.

Suburbs
There was 25,847m² of office transactions signed in the Dublin suburbs in Q2 2017 in 25 individual transactions. This was significantly boosted by the letting of 14,083m² at Block H, Central Park in the south suburbs. 71% of the office leasing activity signed in the suburbs in Q2 occurred in the south suburbs, with 20% occurring in the west suburbs and the remainder occurring in the north suburbs. The suburbs accounted for 26% of overall take-up in Dublin in Q2 and 24% of overall take-up in Dublin in the first half of the year. The overall vacancy rate in the suburbs at the mid-year point stood at 9.66% vs 9.69% last quarter.

Financial services occupiers accounted for the largest proportion (63%) of leasing activity in the suburbs in Q2 2017. 9% of take-up in the suburbs in the first quarter of 2017 comprised computers/ high-tech tenants. Business services occupiers accounted for 6% of suburban take-up in the second quarter of the year. Meanwhile, manufacturing, industrial & energy tenants accounted for 7% of Q2 take-up in the suburbs.

Prime headline quoting rents in the south suburbs remain stable at approximately €296 per m² (€27.50 per sq. ft.) at the end of Q2 while rents in the north and west suburbs remain at €188.30 per m² and €177.50 per m² respectively.

Prime headline office rents Q2 2017
€ per m²
City Centre €673.00 per m²
South Suburbs €296.00 per m²
North Suburbs €188.30 per m²
West Suburbs €177.50 per m²


Investment

The value of office investment transactions extending to more than €1 million completed in the Irish market during Q2 2017 was more than €101 million accounting for 33% of investment activity in the Irish market in the quarter. In addition, almost €39 million of mixed-use transactions (some of which included office properties) were also signed in the three-month period. This brings office investment spend in the first half of the year to just less than €300 million with offices accounting for 37% of overall investment in the Irish market in the first half of the year.

The largest office investment transactions to sign during Q2 2017 included the Park portfolio in the south suburbs, which sold for €38.6 million and One Grand Parade in Dublin 6 for €23 million. Other notable office investment sales concluded in the last three month period include offices at South County Business Park in Leopardstown, Dublin 18 and the Ericsson facility in Athlone, County Westmeath, which changed hands for €20.5 million and €20 million, respectively.

Prime office yields in Dublin remain stable at approximately 4.65% at the end of Q2 2017 but are expected to strengthen over the coming quarters as new market evidence emerges. This is unlike many other markets in Europe where there is little scope for further yield compression. Investors remain specifically attracted to investment in the Dublin office sector considering the strength of underlying occupier activity, volumes of demand and the pace at which new schemes are attracting tenants. With limited office stock available, we are expecting to see increased focus on forward funding opportunities. The Sorting Office forward fund opportunity on Cardiff Lane in the heart of Dublin Docklands, which was recently launched to the market is generating strong interest.