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OFFICE RENTS IN Dublin have grown by almost one quarter in the space of a year, new research by property agency Savills has found.
The rapid increase in the price of office space in the capital can be partially attributed to the depths to which the market sank during the recession, Savills head of office agency Roland O’Connell said.
“Effective rents fell by more than 50% during the downturn and, in that context, it is not surprising that we are seeing something of a bounce-back.”
Despite this, O’Connell said that there was a real danger from the elevated rate of growth in rental prices.
“While increasing commercial rents are welcome insofar as they reflect the underlying strength of the economy, we would not want to see this rate of growth continue in the long term.”
He said that the knock-on implications of high rent prices could hurt Ireland’s competitiveness and the attractiveness of Dublin as a location for mobile international business.
Incentives on the way out
The strong demand for office space has led landlords to cut back on the incentives they are offering potential clients, typically a period of rent-free occupancy.
The roll-back on rent-free periods has combined with the upward headline rent trajectory to give Dublin the highest ‘net effective’ rent growth in Europe, at 39.3% in the last 12 months.
This compares with an average European growth rate of 5.1%.
Dublin was one of only seven European markets across Europe in which the average rent-free period fell, along with international hubs such as Hamburg, London, Dusseldorf and Paris.
Director of research John McCartney said that increased demand has allowed landlords to row back on incentives, with the average rent-free period on a standard office lease halving in the last year.
O’Connell said that the upward trend was an acute reminder of the need for more construction activity to boost the supply of prime office space in Dublin.
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