The Office Market - CBRE
May, 2008
The Office Market Report from CBRE:
According to the latest report from CBRE, the take-up in the Dublin office market remained strong in the first quarter of 2008, with almost 45,000m2 of new lettings signed in the period. An even healthier quantum of office letting activity is anticipated during Q2 on the back of a number of large pre-lettings, which are due to sign shortly. However, with global and domestic economic prospects having been downgraded significantly in recent weeks, sentiment in the office sector has undoubtedly been weakening and despite the fact that demand is still strong, it is certain that some occupiers will put their expansion and re-location decisions on hold in this uncertain environment.
This trend is mirroring the experience of many other cities across Europe as companies’ scale back staffing needs and freeze office searches in light of economic circumstances. Activity in the Dublin office market is therefore anticipated to weaken in the latter half of 2008. In addition to virtually no freehold sales taking place in the market due to funding issues, lease negotiations have become quite protracted in recent weeks. While prime headline rents remain unchanged, occupiers are negotiating more flexible lease terms in the current environment. A number of high-profile office launches have taken place recently for schemes including Burlington Plaza, Dublin 4 and The Observatory Building in Dublin 2.
Other schemes that are due to be launched in the coming weeks include the Hanover Reach building on Hanover Quay. The Dublin office market is better insulated going into this downturn than it was during the technology crash in 2001. More rigorous assessment of new office schemes and careful phasing of new developments is a welcome outcome of the current funding crisis as this will ultimately prevent oversupply and sustain rental values, despite the fact that occupier demand is starting to ease. While we are confident that any cyclical slowdown in this sector will ultimately correct itself, in our opinion, the biggest threat to the long-term sustainability of this sector of the Irish property market is tax harmonisation, with Ireland’s 12.5% corporation tax rate being the single biggest reason why international occupiers choose to locate here.
Prime Headline Office Rents
- City Centre € 673 per m2
- South Suburbs € 296 per m2
- North Suburbs € 269 per m2
- West Suburbs € 215 per m2