Prime office rents in Dublin city centre can hold their current level of around €60 to €65 per square foot, according to HWBC’s H1 2019 Dublin Office Market Review. The review finds that despite recent record levels of take-up, demand is still strong, underpinned by technology sector companies and also high demand from Government tenants.
1.73m sq ft of space was let in the first half of the year, with the bulk of deals taking place in the first three months. Although take up in the second quarter was below average, HWBC remains confident that the demand pipeline will hold up, with up 1.0m sq ft of space reserved and in advanced stages of negotiation for completion in the second half of the year. Companies such as Amazon, WeWork and Slack are all in expansion mode and expected to sign contracts for additional office space in H2 2019.
There has been 905,000 sq ft of newly completed space in H1 2019, with 75% of this pre-committed on or before practical completion. Nearly half of the space under construction in the city and scheduled for completion by the end of 2021 is already reserved and this rises to 84% for the space due to reach completion by the end of this year.
In an orderly Brexit scenario, HWBC does not expect upward pressure on prime rents. A no deal ‘hard Brexit’ could put further upward pressure on rents if it sparks a wave of new demand from companies exiting London, or FDI investors favouring Dublin over the uncertain environment in the UK, particularly around free movement of people.
In the prime suburban areas of Sandyford and Leopardstown rents rose 7% in the past year, to between €30 and €32 per sq ft, and are expected to rise further. With tighter supply at the top end of the market, lease commitments are moving to minimum 10 years term certain for the larger transactions. Big tech is still driving a lot of this demand but there are also sectors such as fintech, medtech, pharma and life sciences adding to demand levels.
Editor of Irish Construction Industry Magazine