Supply constraints will send the cost of renting offices in Dublin soaring again this year and could likely take the shine off the capital as a leading destination for service and internet firms, the Society of Chartered Surveyors Ireland (SCSI) has said.
In its 2016 outlook, the surveyors predict rents for ‘prime’ office and stores in Dublin will climb 11.7% this year, while the value of office development land after soaring 27% last year is expected to rise this year by 16%.
Value of residential development land, meanwhile, soared 20% last year and will rise 12% this year.
Among a number of reasons the lack of available finance for developers is contributing to shortages, SCSI said.
“While some respondents are anticipating an increase in supply in 2017, no new office space has been delivered to the Dublin market for the last five years and as a result demand continues to surpass supply,” said Brian Meldon, chair of the commercial group at SCSI.
“There are ongoing concerns about Dublin’s ability to continue to attract service sector foreign-direct investment in the absence of appropriate office space.”
Supply and demand will likely in time come into balance in the office market, but nobody is too sure that this will happen in the residential market.
Concerns about the lack of housing for employees “should weigh heavily on the minds of Ireland’s political parties”, Mr Meldon said.
The review found that:
- Prime office rents which had already reached €561 per square metre in Dublin would rise by 11.7% in 2016;
- Prime office rents in Munster will rise almost 6% this year; n Excluding Dublin, prime office rents in Leinster will rise by over 6%;
- Prime office rents in Ulster-Connacht will rise 5.2%.
In retail, the chartered surveyors said rents on Dublin’s Grafton St soared almost 18% last year.
Dublin zone A rents rose 16.8% to €5,247 a meter in the capital and will increase a further 11.5% this year. In Munster, retail rents will increase 8%, by 7.2% in Leinster, and by 4.5% in Connacht-Ulster.
Prices for residential development land climbed 19.7% in Dublin last year.
Prices also rose sharply in Munster and in Leinster, by over 15% and 10%.
The IDA said the capital has done well from foreign- direct investments and more office supply was coming on stream.
“Any tightness of supply is very much a reflection of the success Dublin has had and much of the discussion around this issue concerns supply in one particular part of the city,” said an IDA spokesperson.