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Dublin leasing market on track for bumper year

By James Buckley - Monday, October 09, 2017 10:07

More than 183,000 sq m of office lettings were signed in Dublin during the first three quarters of 2017.

According to CBRE, 183,630 sq m of office leasing transactions were signed in the Dublin market in the nine-month period, with more than 80% of this leasing activity having signed in the first half of the year alone. 

The volume of leasing activity recorded in the third quarter specifically (33,630 sq m) was somewhat disappointing considering underlying activity levels with many of the leases that signed in Q3 comprising relatively small size lettings and no lettings of more than 4,645 sq m signing in the quarter.

In total, 47 individual lettings occurred in Dublin in the third quarter of 2017 compared to 121 in the first six months of the year. 23 of the 47 transactions that completed in the quarter extended to less than 465 sq m. The volume of stock reserved at the end of the quarter at more than 100,000 sq m is very positive and bodes well for leasing activity volumes in Q4 and into Q1 2018.

Financial services tenants accounted for 36% of take-up in Dublin in Q3 while tenants in the computer and high-tech sector accounted for 20% of office transactions signed in Dublin during Q3 2017. Meanwhile, the public sector accounted for 15% of leasing activity in Dublin in the quarter.

The overall rate of vacancy in Dublin fell in Q3 2017 to 6.18% while there was a slight uptick in vacancy rates in the city centre and Dublin 2/4 in the period. Meanwhile, the overall rate of vacancy in the suburbs at the end of Q3 was 8% vs. 9.66% last quarter. The city centre accounted for 75% or 25,366 sq m of office take-up in Dublin in Q3. Take-up in the suburbs was relatively evenly split between the west and south suburbs with no lettings having signed in the north suburbs during Q3.

Prime rents in the capital rose in Q3 2017 to reach €681 per sq m (€63.50 per sq ft) and are now expected to reach €700 per sq m (€65 per sq ft) by year-end.

The value of office investment transactions extending to more than €1 million completed in the Irish market during Q3 2017 was more than €220 million accounting for 41% of investment activity in the Irish market in the quarter. This brings office investment spend in the first nine months of the year to approximately €520m.

On the back of recent market evidence, prime office yields in Dublin contracted by 40 basis points in the quarter to reach 4.25% at the end of Q3 2017 and are expected to strengthen a little further over the coming months. 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, CBRE are expecting to see increased focus on forward funding opportunities. 

According to Marie Hunt, Executive Director & Head of Research at CBRE Ireland: “The volume of leasing activity recorded in Dublin in Q3 was disappointing considering the bumper take-up achieved in the first two quarters of 2017. However, with more than 100,000 square metres of accommodation reserved at the end of the quarter including five transactions extending to more than 4,645 sq m (50,000 sq. ft.), a bumper Q4 is now anticipated, with annual take-up volumes in 2017 likely to exceed the long-term annual average for the fourth year running”.

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