Although office take-up in Dublin in the first quarter of 2012 was down more than 30% compared to what was an exceptionally strong Q1 last year, this should not be interpreted as a deterioration in demand levels in the office sector.
One large letting has the ability to skew the quarterly take-up significantly. In addition, the considerable length of time it is taking to conclude negotiations in the current market is rendering quarter-on-quarter comparisons somewhat meaningless. According to our research, there is more than 180,000 square metres of outstanding requirements for office accommodation in the capital at present with a number of new large requirements emerging in recent weeks alone.
These include a large requirement for more than 37,000 square metres from Microsoft and a requirement from Arthur Cox Solicitors for more than 12,000 square metres in Dublin city centre. In addition to several large requirements, there is particularly strong demand for small office suites of less than 500 square metres at present. The recently-completed office building at 2 Hume Street in Dublin 2, which is owned by IPUT, is now almost fully let with occupiers including Emirates and IPNAV having signed leases in recent weeks.
Other recent transactions include the letting of 1,951 square metres to Towers Watson at the Trinity Point building in Dublin 2 where BNP Bank are reportedly in negotiations to lease an additional floor of 828 square metres; the letting of 1,115 square metres to Jazz Pharmaceuticals on the 4th floor of Connaught House on Burlington Road in Dublin 4 and the letting of 337 square metres at 14-15 Lower Camden Street to marketing company Modern Green.
Rents for prime buildings in Dublin 2/4 are now showing signs of stabilising although tenants continue to negotiate favourable letting terms and conditions, particularly for older buildings in need of some refurbishment or upgrading. Landlords are willing to negotiate on rent in order to generate income to cover service charge and rates costs.
Although funding for office purchases remains scarce, some small office suites have sold in recent months for attractive yields and a Georgian office building at 1 Mount Street Crescent in Dublin 2 recently sold for approximately €900,000 or more than €2,900 per square metre. The emerging scarcity of Grade A office buildings in Dublin 2/4 to facilitate companies that want to locate a large number of employees in one facility could lead some large occupiers to consider purchasing sites to develop their own bespoke office facilities as was evidenced by the announcement that the Central Bank are to pay approximately €8 million for the part-complete former Anglo headquarters building at North Wall Quay in Dublin 1. With funding for development projects likely to continue to remain scarce for the foreseeable future, such developments will have to be completed in conjunction with equity partners