The Dublin office market is continuing its steady rebound and showing resilience according to latest research from Cushman & Wakefield released this month.
A clear example of this is the vacancy rate, which declined during the second quarter, particularly in the Central Business District (CBD). The net vacancy rate in the CBD now sits at 5.9%, with some sub-markets as low as 3%. This is down from 7.5% during the same point in 2021, it’s highest figure in a number of years.
The decline in the CBD net vacancy rate follows positive trends in leasing activity. Over 51,000 sq m of space was signed in the three months to June, with a large CBD focus as a flight to quality remains, while a total of 110,350 sq m is reserved as of the end of June 2022.
Commenting on the market, Kate English, Chief Economist, Head of Ireland Research & Insights at Cushman & Wakefield said: “Much focus now turns to construction activity, and what will be delivered to the market in the coming years – a total of 136,300 sq m is due to complete in the second half of 2022. 60% of this is signed or reserved, meaning just over 53,000 sq m is available. A further 118,050 sq m is under construction and due to be delivered in 2023, of which a larger proportion is net available at present. However, with currently +390,000 sq m of active live requirements in the market, this suggests demand is there to absorb.”
Rental growth is evident in prime office rents, with rents at €673 per sq m as of Q2. To the surprise of perhaps many, this is a return to pre-covid levels, and reflects a quarterly rise of 4.3%. Adding further, Ronan Corbett, Head of offices pointed out: “There is clear evidence of upward rental pressure on prime buildings with high environmental credentials, as record rents are being achieved for the most sustainable buildings. With greater questions emerging on older quality stock, a two-tier market is emerging, this trend is set to continue for the remainder of the year and into 2023 despite economic headwinds and some commentator’s negativity to the sector”.
The commercial real estate company also released figures for the Irish investment market, which revealed a total transaction volume of €1.95billion into Irish commercial property during the first half of 2022. This is 15% higher than the average over the past ten years, highlighting property remains an attractive asset class, with Ireland providing competitive returns in a European context.
Residential remained the top asset class, accounting for 34% of investment volumes, while industrial & logistic assets absorbed a further 18%. Following a slow start to the year, office investment activity picked up in Q2, bringing H1 activity to a sum of €355m.
Kate English added: “The first half of the year has seen very strong investor activity taking place; however, we may see a year of two halves. As interest rates rise, costs and uncertainties have increased, this is impacting both purchaser and vendor sentiment. Nobody would argue that there remain significant volumes of capital that wishes to be deployed into real estate, however, dynamics have shifted and therefore the market is likely to see some element of price adjustments, while there may also be a wait and see approach taken by others.”
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