The Society of Chartered Surveyors Ireland (SCSI) Commercial Property Review and Outlook 2014 indicates that prime office rents in Dublin are now priced between €350 and €377 per sq m and that the vacancy rate in Dublin City Centre is around 9pc, with 7pc to 8pc considered a shortage.
A survey of 400 chartered surveyors formed the key part of the SCSI report, which was published in conjunction with Amárach Research. Two-thirds (66pc) of those surveyed said they expect the supply of prime office space in Dublin to fall over the next 12 months while three out of four said they expect rents for these properties to rise.
The report also highlights concerns over shortages of modern office space in Cork and Galway and claims these may threaten the country’s ability to continue to attract foreign direct investment.
“While the turnaround is most welcome it is paramount that we address supply issues,” said Eamonn Maguire, chair of the SCSI commercial agency professional group. “At the moment we are seeing the effects of the lack of construction over the past four to five years and this, together with increased international investment and demand, is leading to a tightening of supply for modern office space in the major cities.
“This shortage is leading to increased rents and a declining vacancy rate and measures must be put in place to ensure that this does not threaten our competitiveness in terms of attracting foreign direct investment. The current demand is largely driven by multi-national organisations in the telecoms, media and technology sectors and these increasingly mobile firms cannot afford to wait 24 months for projects to get off the ground”.
“Ensuring the availability of development finance for measured speculative development, introducing fast track planning in strategic areas and speeding up the Docklands SDZ will, we believe, address the supply issue while also supporting job creation.”
The report also suggests that a two tier commercial office market is emerging and that offices outside the major cities and in regional areas continue to struggle.
It says that in the retail sector, rents for prime rental in Dublin continued to fall in 2013 and are now just above €4,000 per sq m. However, with 75pc of surveyors not expecting an increase in the supply of prime retail in the city, the report predicts that this should result in a stabilisation of rents.
Rents for prime retail increased in Leinster and are now at €325 per sq m an increase of 7.3pc. While they also increased across most retail categories in Connacht and Ulster, rents continued to fall in Munster reflecting tough trading conditions in Cork, Limerick and Waterford.
According to the report, rents for prime industrial rents in Dublin have also started to stabilise at €61 per sq m largely driven by demand from online distribution and data centres and the food sectors.
Investment in the commercial property market increased to around €2bn in 2013, three times higher than 2012 and that pace of investment looks set to continue in 2014, the report states. It says that over half of investment spend in 2013 came from international investors with strong demand from the US, Europe and Asia