Dublin prime office rents in mid-2005 were the seventh highest in the world according to CB Richard Ellis (CBRE) and following a plunge of more than two-thirds in the value of Irish commercial property during the economic bust, office rents in the Irish capital are set to return to the ranks of the most expensive in the Europe, Middle East, Africa (Africa) region.
HWBC, a property agency, said in a review published earlier this month that prime Grade A offices in Dublin City centre rose 15% in the first half of the year and it expects an annual rise of 30%.
CBRE's latest data show that Dublin prime office rents are now about €457.50 per square metre (€42.50 per square foot), up 6% since July and 21% year-to-date (ytd) on the back of 27% in 2013.
The take up of office space for H1 was 95,200 m2 which is 50% higher year on year, with the technology and financial services again the dominant market sectors. "Four of the top five deals so far this year are US tech companies, including Amazon, Dropbox and Oracle," HWBC said [pdf].
Following the granting of planning permission last week for a KWE (Kennedy Wilson Europe) redevelopment of 27-33 Upper Baggot Street, Dublin 4, Davy in a note has estimated a rent of €538 per square metre (€50 per square foot) when the building will be available in 18-24 months.
In early 2006, the craziest year of the Irish property bubble, CBRE said in respect of the Dublin 2/4 area and Dublin Docklands, it expected to see prime rents in these areas "escalating to between €592 and €645 per m2 before year-end."
In 2013 Irish prices for consumer goods and services were 18% above the European Union (EU) average despite Ireland being the only member country to have experienced a fall in prices in the period 2008-2012.
One investor advised us that during the bubble period and in recent times, some deals involve secret refund agreements. For example, bigger lettings in Dublin in the last 12 months (Facebook, William Fry, Dropbox etc.) were for effective rents of under €30 per sq ft. This issue has implications for banks who lend based on prime headline rents taht are in effect exaggerated.
The Dublin property situation also partly reflects a dysfunctional planning system with an aversion to high rise while the high costs of servicing the FDI (foreign direct investment ) sector does have a negative impact on the development of the indigenous trading sectors.