Retail units also experienced rapid rent increases in 2015
Office and retail rents are set to continue climbing in Dublin, although the rate of price increases will drop from last year’s rate.
The Society of Chartered Surveyors (SCS) say the results of a new survey predict that retail and office rents in Dublin are expected to rise by 12% in 2016, compared to 24% in 2015.
The value of office development land rose by 27% last year, and is expected to climb by 16% this year.
Prices outside Dublin will also increase, the survey predicts, but at nowhere near the rates expected in the capital. The SCS say they expect prime office space in the rest of Ireland to increase by 5 to 6%, with retail rents in Munster and Leinster (excluding Dublin) up by 7 to 8%, and up 4.5% in Connacht.
The predictions come on the back of DTZ Sherry Fitzgerald announcing that office occupancy in Ireland is at its highest level since 2007. Prime rents in Dublin’s Central Business District were up 90% since the trough in the market in early 2013, DTZ Sherry Fitzgerald said.
The survey found there was a 24.1% increase year on year in prime office rents in the capital in 2015, with new investors increasing demand for city centre locations. The SCS report that technology companies in particular are driving up demand for office space in the city. The average price for prime rents in the city was €561 per sq m.
The survey does find that there has been an increase in investment in suburban locations, with lower rent prices and newly renovated facilities attracting investors out of the city.
Supply and demand
Despite predictions of an increase of supply, there remain concerns over Dublin’s ability to meet the demand.
Brian Meldon, SCSI Commercial Agency Professional Group Chair, said: “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.
“As a result, there are ongoing concerns about Dublin’s ability to continue to attract service sector Foreign Direct Investment in the absence of appropriate office spac,” Mr Meldon added.
In their announcement, DTZ Sherry Fitzgerald say supply levels in Dublin have “returned to more normalised levels,” while “in contrast there is an acute shortage of supply in Galway.”
Rents for businesses are not the only concern the SCS have, with a lack of housing and high quality public transport also acting as barriers to investment in the office sector,” they say.
“These concerns should weigh heavily on the minds of Ireland’s political parties who will contest the upcoming general election on the back of their plans for further job creation” Mr Meldon said.
Rises in retail prices were similar, though not quite as high in 2015.
Rents for retail units on Grafton Street went up by 17.9% in 2015, with prime rental in Dublin went up by 16.8% with prices reaching €5,247 per sq m. Respondents to the survey predict Dublin retail rental prices will rise by 11.5% in 2016 – while they expect Connacht/Ulster prices to go up by 4.5% and Munster and Leinster to rise by 8.0% and 7.2% respectively.
“This reflects a strengthening domestic economic recovery and improving consumer sentiment,” Mr Meldon said.
“However, demand in town centres, suburban areas and neighbourhood shopping centres remains subdued and higher vacancy rates will likely remain a challenge within these areas in 2016, despite the positive forecasts for rental value growth.”
Dublin office development land rose by 26.7% in 2015 - with this growth set to continue at 16% in 2016.
The value of residential development land was also rising rapidly in 2015 – with residential development land going up by 19.7% in Dublin, 16.7% in Munster, 15.1% in Leinster and 10% in Connacht/Ulster.
While the SCS predicts continued price rises in 2016, they expect the level of growth to slow somewhat, with Dublin residential development land prices expected to go up by 12.1%.