Dublin Office Lettings fall 50% from 2011
THE DUBLIN office-letting market has had a slow start in the first three months of this year, with lettings down by at least 50 per cent on the same quarter in 2011.
Estate agents Lisney said that while take up of space in Q1 was only 22,900sq m (246,494sq ft) compared to 54,500sq m (586,633sq ft) last year, it still believed that 2012 would bring an increased level of activity on the previous 12 months.
Lisney argued that the figures did not tell the full story as one deal in the first quarter of 2011 – Google’s purchase of the 19,044sq m (204,988sq ft) Montevetro building – accounted for 35 per cent of all transactions.
CBRE said the slippage in the volume of lettings signed in Dublin during the first three months was not surprising, considering the time it was taking to conclude negotiations and the fact that many corporate occupiers were curtailing their expansion and relocation until such time as the economic climate was more certain.
The agency said overall demand for office space in the capital was up 71 per cent quarter-on-quarter as a result of some large requirements that emerged during the first three months of this year. It estimated that there was now a requirement for 181,000 sq m (1,948,268sq ft) of office buildings, with almost 54 per cent expressing a preference to locate in Dublin city centre.
Jones Lang LaSalle reported a 20 per cent increase in inquiries and said it was hoped that most of these would be completed in the next three months. The average deal size of 653sq m (7,023 sq ft) in the last quarter showed that demand was focused on space of less than 929sq m (10,000 sq ft). There may be shortages of good quality prime space in this size category in Dublin 2 and 4.
The long term average take up over 15 years is 179,500sq m (1,932,122sq ft) per annum, according to Lisney. Last year, the figure was 164,000sq m (1,765,281sq ft), demonstrating that the market was now almost back to normal activity levels. What was noticeably different, the agency said, was the increased focus from overseas occupiers and particularly those from North America.
Lisney said that 20 of the 34 transactions completed in Q1 were for space of less than 450sq m (4,844sq ft). This was an encouraging sign for two reasons – it may indicate a certain level of confidence was returning to the market from smaller occupiers who previously were unsure about making property decisions and, secondly, it might also be a positive indicator that there were some new overseas occupiers dipping their toe into the Irish market. Experience would show that such companies grew quickly.
Jones Lang said the technology sector was still driving demand, accounting for 30 per cent of all deals in the last quarter, followed by banking and finance which was involved in 15 per cent of the lettings. Both of these sectors had consistently outperformed the rest of the market and they expected this to continue throughout the remainder of the year.
The three agencies differed on the proportion of office space now unoccupied in Dublin city centre, with CBRE putting the figure at 23 per cent, Jones Lang having a stab at 19.9 per cent and Lisney calculating it at 16.8 per cent. Lisney said that of the 374,600sq m (4,032,160sq ft) of space for sale or to let in the city, 28 per cent of it was either obsolete or nearing obsolescence.
Lisney forecast that rental growth will return towards the end of this year or early in 2013. CBRE estimates that prime rents now stand at €296 per sq m (€27 per sq ft), while Jones Lang says rents have further stabilised at €301 and €344 per sq m (€28 to €32 per sq ft).
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China’s Vice President visits Ireland
The Chinese Vice President has begun a three-day visit to Ireland today, saying that he aims to deepen mutual friendship and take bilateral relations forward.
Xi Jinping brings a 150-strong Chinese delegation of business leaders and government officials.
Mr Xi landed at Shannon Airport at 4.15pm.
He was greeted by Tánaiste Eamon Gilmore, who said that the visit was significant and would lead to increased trade with China.
The first stop in his visit was the Shannon Development, which has strong links with China.
He was given a gift of bog bark and watched a presentation in mandarin of the business organisation’s activities.
The day finished with a dinner at Bunratty Castle, described as a traditional medieval banquet of lentil soup, roast loin of pork and lemon tart along with entertainment.
More than 100 people were there including Minister for Finance Michael Noonan, Minister for Communications Pat Rabbitte and Minister for Agriculture Simon Coveney, along with local TDs from Clare.
Trade with China is already worth €8bn per year and the Government hopes to get a major boost from this trip securing investment and enticing China to use Ireland as a gateway for European trade.
Taoiseach Enda Kenny has said that the visit by the Chinese Vice President was primarily about trade and understanding.
Mr Kenny has said both he and the Tánaiste would raise the question of what he described as China’s improving response to human rights with the Vice President.
Tomorrow the focus moves to agriculture and showcasing Ireland as a tourist destination.
via rte news
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Dublin Office Vacancy rates at 23% – twice the European average.
Rather than focusing on the overall rate of vacancy, it is important to consider the level of vacancy in the various office districts to get a clearer picture
ONE OF THE issues that is of particular concern to the many international investors who are currently running their slide rule over Ireland is the high rate of availability in the Dublin office market, particularly when compared to other jurisdictions.
The definition of vacancy is the proportion of built accommodation which is being formally marketed to let (excluding pre-lettings and buildings which are not yet practically complete) expressed as a proportion of the overall stock in the market.
Across Europe, the average vacancy rate in the office sector is now in the order of 10.25 per cent – a rate that is deemed high considering the fact that a 7 per cent vacancy rate is generally believed to be the ideal balance between supply and demand in a mature market. In Dublin, the overall rate of vacancy in the office sector is now more than twice the current European average at just under 23 per cent, with more than 830,000sq m (8,934,045sq ft) of office buildings in the capital currently being marketed to let.
This is the equivalent of almost five years of take-up for the Dublin market, which is naturally concerning potential investors. The high vacancy rate is also giving a false sense of security to some potential occupiers who believe that there is an endless supply of office buildings to choose from in the current climate.
However, the reality is a little different. Rather than focusing on the overall rate of vacancy (which includes a significant proportion of accommodation which is not fit for purpose, is too small or is located outside of where occupiers actually prefer to locate), it is important to consider the level of vacancy in the various office districts and to drill down into the numbers to get a clearer picture.
The word “vacancy” is somewhat of an anomaly as a large proportion of the office buildings, which are currently being advertised to let in Dublin and included in the quarterly vacancy calculations each quarter, are not actually vacant.
In fact, a significant proportion of the accommodation that is being publicly advertised to let comprises buildings (or for the most part floors in otherwise occupied buildings) where rent is being paid but where companies are attempting to assign or sub-let excess accommodation. The overall rate of vacancy in Dublin is therefore considerably higher than in other European cities who specifically exclude this accommodation when calculating vacancy.
Even at the peak of the Dublin office market in 2006 and 2007, the vacancy rate in Dublin was significantly higher than in many other cities and was in double digits, highlighting the fact that a considerable proportion of the office property being marketed to let comprises relatively small lot sizes in buildings or locations where occupiers generally don’t want to locate.
Many people base their perception of vacancy on the number of “To Let” signs in Georgian Dublin when, in actual fact, the majority of office occupiers in the market are focused on securing much larger lot sizes in modern buildings in the CBD (central business district).
Much of the activity in the Dublin office market in the last two years has involved companies taking advantage of the ability to relocate to alternative premises on the basis that rental values have fallen considerably. Unfortunately, many of these companies vacate one building in order to move to another, and the inevitable result is that the original building goes back onto the market to let and back onto the vacancy list.
If companies are consolidating operations and moving to smaller buildings, a larger amount of accommodation goes back into the vacancy listing than the amount of accommodation they have removed from it, which only exacerbates the problem.
Although underlying levels of take-up continue to remove some stock from the availability listings each quarter, incidences of availability continue to materialise as companies consolidate operations and attempt to sublet or assign excess accommodation.
Although the office letting market is now reasonably transparent compared to other sectors of the market, tracking net absorption accurately is not an easy task. To get an accurate number, all office agents would have to commit to tracking not just the amount of accommodation let each quarter but also the quantum of accommodation that these occupiers vacated in order to move.
Many focus on the overall rate of vacancy when, in actual fact, the vacancy rate in each district of the market is quite different. For example, while the overall vacancy rate in Dublin is now close to 23 per cent, the vacancy rate in the south suburbs of the city is closer to 14 per cent.
More than 70 per cent of the office accommodation that is currently being marketed to let in Dublin is classified as Grade A. However, this does not mean that there are large numbers of entire vacant buildings of a good quality available to let, particularly in the city centre. Indeed, half of the Grade A classified accommodation is located outside of the city centre region. Rather than hundreds of instances of entire empty buildings dotted around the city, the vacancy rate is largely made up of floors in otherwise occupied buildings.
According to CBRE Research, 64 per cent of all office accommodation being marketed to let in Dublin city centre at present is classified as Grade A. However, this is made up of 156 separate instances of vacancy, suggesting that most of this accommodation is relatively small.
An occupier with a requirement for more than 5,000sq m (53,820sq ft) of Grade A accommodation in the prime Dublin 2/4 postcode will therefore have only a handful of buildings to choose from, unless they are willing to:
- Let accommodation in a secondary building and incur the associated costs of fit-out and refurbishment.
- Split their employees over a number of different buildings.
- Opt instead to move to a suburban location where they can find a building that meets their specific size requirement.
Dublin is quite unique in European terms in that there is no new speculative accommodation currently under construction in the capital. When one considers the scarcity of debt funding and the fact that speculative development doesn’t make financial sense considering where rental values are at in the current market, the likelihood is that there is not going to be any speculative development occurring for some time. One would assume that this would lead to some decline in the availability of office accommodation in the short to medium term.
However, the vacancy rate in Dublin is not going to come down any time soon. Despite the fact that take-up is thankfully continuing at pace, chipping away at the vacancy rate in a market where many companies are continuing to offload excess properties is going to be no mean feat.
via Marie Hunt Is head of research at CBRE
Facebook considers doubling size of Dublin office
FACEBOOK IS reportedly considering more than doubling the size of its European headquarters in Dublin.
The move comes ahead of a possible $10 billion (€7.75 billion) initial public offering (IPO) later this year.
Bloomberg reported yesterday that the popular social networking site may lease as much as 11,150sq m of office space in the capital over a five-year period.
Facebook, which set up its Dublin office in 2008, currently occupies about 5,000sq m of space at Grand Canal Dock.
The Irish Times reported in November that the company had agreed to rent a further 1,021sq m in the Hanover Reach office block, where it is currently based.
Among the options now reportedly being considered by the firm are the former Bank of Ireland headquarters building on Baggot Street, Dublin, and two office blocks close to its existing office, said Bloomberg.
The social networking giant has more than 800 million active users.
Facebook’s Dublin employees mainly work in advertising, multilingual sales support, finances, human resources, user operations and development.
The company employs about 300 people locally, having taken on an additional 100 staff last year.
Revenues at the Irish subsidiary rose from €15.2 million to €229.1 million in 2010, according to the accounts lodged at the Companies Office late last year.
Facebook Ireland also generated a pretax profit of €1.9 million in 2010, up from €297,000 in 2009.
The company recently agreed to make significant changes to the way it handles users’ privacy and data following an audit by the Irish Data Protection Commissioner, which was published in December.
Co-founded by chief executive Mark Zuckerberg in 2004, Facebook is currently examining a $10 billion IPO that would value the California-based company at more than $100 billion.
The company is just one of a large number of well-known technology giants to set up base in Ireland. Others include Google, Microsoft, PayPal, Yahoo and Twitter.
A spokeswoman for Facebook refused to comment on the report.
via the Irish Times
