Prime office rents in Dublin are forecast to rise in the 12% to 31% range in 2015 after a 29% surge in 2014 according to Society of Chartered Surveyors Ireland.
The organisation's Annual Commercial Property Review & Outlook 2015 published today says that SCSI members reported that the Dublin Region office rent for prime ‘grade A’ offices in 2014 was €452 per sqm (squarer metre) in 2014, representing an increase of up to 29% on 2013 prices. Average prime ‘3rd Generation’ offices fetched €389 per sqm, conveying a 13.7% increase.
Dublin-based SCSI members expect a 12% increase in rents by year end on prime “grade A” office space, but with an acute shortage of space in this market segment, that figure could well be exceeded and today's report says industry experts anticipate prime “grade A” office rents to hit €592 per sqm by year end if the positive economic growth trends continue.
"A further increase in 2016 to €645 per sqm is not unrealistic if the economy continues to grow."
In early 2006, the craziest year of the Irish property bubble, Finfacts reported that 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 sqm before year-end."
In 2006 Dublin office rents rose by 43% as Irish public sector demand jumped; Dublin and Mumbai were the highest risers in the world. The prime rate in Dublin was at €823 per sqm
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Eamonn Maguire, chair of the SCSI Commercial Agency Professional Group said “The increase in rents has been largely due to a lack of supply combined with higher levels of demand from domestic and international companies seeking new office space or to expand existing operations as we have seen several of the large Technology, Media and Telecommunications companies do in 2014.”
“Ensuring the availability of development finance for measured speculative development is key and will address the supply issue while also supporting job creation. But we have some concerns that companies won’t want to wait around for 18-36 month completion timeframes and that is why it is imperative the Government addresses this issue immediately” he said.
Four hundred and twenty Chartered Surveyors were surveyed for the SCSI report, published in conjunction with Future Analytics Consulting.
In the retail sector, capital values in Dublin’s Grafton Street alone grew by approximately 28% in 2014. Rents increased by 11.5% for prime rental in Dublin following declines in recent years as rental prices reached €4,491 per sqm. Respondents to the survey expect prime retail rents in Dublin to increase by 10% in 2015. In Connacht/Ulster, they are expected to increase by around 9% and in Munster and Leinster by approximately 5.5%.
Development land values increased in 2014, most notably by 32% in Dublin, 24% in Munster and Leinster and 4% in Connacht/Ulster for residential development land. SCSI members anticipate residential development land values in Dublin will increase by around 17.5% in 2015.
The industrial sector also experienced positive growth, much of which was focussed on the Dublin market. Prime industrial rents under 500 sqm increased to €82 per sqm, representing an increase of approximately 34% year on year.
Investment in the commercial property market accelerated to around €4.5bn in 2014, up from €2.6bn in 2013 and despite a slightly slower start to 2015, increased investment looks set to continue in 2015.