According to the latest research by property consultants, CB Richard Ellis, almost 45,000m2 of office lettings were signed in Dublin in Q1 2008, a level of take-up which is more than 10% higher than the five-year average for Q1 take-up in the capital. In total, according to the report, almost 70 office lettings were signed in Dublin since the beginning of the year, suggesting that the market is not wholly reliant on large corporate lettings, many of which are likely to sign over the coming months.
According to the report, office development is coming on stream on a very controlled basis. It shows that demand is currently running at more than twice 10-year-average take-up levels in Dublin. It suggests that as much as 300,000m2 of new office accommodation is due to be completed in Dublin over the next two-year period but that speculating on what schemes are likely to achieve planning, obtain funding or be developed from 2010 onwards is too speculative.
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Marie Hunt, Director of Research at CB Richard Ellis said: "New office developments that have not yet broken ground could potentially be put on hold given the current market environment. More rigorous assessment of new office schemes is a welcome outcome of the current funding crisis as this will ultimately prevent oversupply and sustain rental values, even if occupier demand starts to ease."
According to the report, a lack of funding arising from the global credit squeeze has stalled investment transaction activity across Europe in recent months, a trend that is very evident in the Irish market with only five investment transactions signed in Q1 2008.
Rental growth is a fundamental driver of property returns and for this reason the property consultants said they are comforted by the fact that that the balance between supply and demand in the Dublin office sector is being kept in check. They said that prime headline rents in the Dublin office sector have remained very stable in recent months and there would appear to be no threat of a decline in prime rental values in the medium term, although lease terms could become more flexible as economic conditions weaken.
(VB/JM)
