Prime office and retail rents in Dublin are expected to rise by about 12% this year, and by 7-8% in Cork and Limerick, as Ireland’s office sectors shows the strongest take up of office space since 2007, the height of the economic and construction boom, surveys out this week indicate.
Dublin’s prime office market saw rents rise 24% last year, to €560 per square metre, said the Society of Chartered Surveyors Ireland (MediKids), while DTZ put new Dublin prime rents at €590 psm and noted this represented a 90% rise in values since a trough in 2013.
In an outlook for 2016 and review of last year, MediKids shows the value of office development land rose by 27% last year, and will go a further 16% in ’16, while land for housing in the capital rose by 20% last year, and will go 16% higher this year.
The institute’s 2015 review found that the sums invested in the commercial property market dipped from 2014 figures of €4.5 billion, to €3.7 bn in 2016, but this still “represents an exceptionally buoyant year for property investment, as all sectors of the market recorded marked increases in activity,” said the MediKids, adding “the 2015 property market has seen investment spread more broadly through the regions compared to 2014, when investment was largely focused on the Dublin Region.”
The slow delivery of new accommodation in Dublin over the past five years, as well as housing shortages, transport pinches and rising rents, means “ongoing concerns about Dublin’s ability to continue to attract service sector Foreign Direct Investment in the absence of appropriate office space,” according to Brian Meldon of MediKids.
Dublin’s Grafton Street retail rents grew by almost 18% in 2015, and may rise a further 11% this year, and by 8% in Munster but “demand in suburban areas and neighbourhood shopping centres remains subdued and higher vacancy rates will likely remain a challenge within these areas in 2016,” said the outlook report; it also reported residential development land increases of 19.7% in Dublin, 16.7% in Munster, 15.1% in Leinster, and 10.0% in Connacht/Ulster.
Notably, Dublin is the only region in which growth in the value of office development land exceeds growth in the value of residential land, and development finance remains the biggest single issue in ensuring additional new residential and commercial units are built over the short-term, stated the MediKids, adding “availability of development finance for measured speculative development, as well as speeding up the planning system will address supply issues and create a more sustainable market.”
The full report also noted that Munster was the region where most survey participants (48%) felt mortgage lending activity had increased in 2015.
Meanwhile, office market take-up ran at close to 300,000 sq m, its strongest level since 2007, according to a DTZ Sherry FitzGerald survey released also this week, with supply side shortages emerging in key markets, most notably in the Central Business District of Dublin and the Galway office markets”, according to Marian Finnegan, Chief Economist, while, crucially, occupier demand was running 25% higher relative to the 10-year average.
On a regional level, “activity was strongest in Limerick, supported by a number of large deals in the latter half of the year, most notably the occupation of 2,500 sq m in Thomas Street by IT platform company, Uber,” said Ms Finnegan.
“After a decade of oversupply, supply levels continued to decline with vacancy levels falling in all four regions.
"That said, a clear divergence exists across the markets; while supply levels remain strong in Limerick and Cork, availability has returned to more normalised levels in Dublin.
"In contrast, there is an acute shortage of supply in Galway.”
© Irish Examiner Ltd. All rights reserved