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Dublin Office Rents Heading Towards Pre Recession Levels
By Ruth Baily
The shortage of office buildings in prime Dublin locations will push office rents past pre-recession levels in the next two years. Davy Stockbrokers have predicted that the current lack of development will continue to drive prices across the sector.
According to Barry Dixon Head of Research at Davys, “While market appetite for office development and refurbishment risk has returned, with 56,000 sq m of office development and refurbishment projects under way in Dublin’s central business district, we expect office rents to continue to inflate over the next two years and pass their 2007 peak.”
As the economy continues to recover, increased demand from both domestic and international companies who wish to either locate or expand the size of their current floor space will find the cost of doing so more expensive. Companies who are looking for Grade A developments in the ever popular Dublin 2 and 4 postcodes can expect to encounter double digit inflation.
For the next 24 months at least the lack of new development coming on stream will create a supply and demand imbalance.
It is therefore imperative that real, meaningful construction gets underway to correct this imbalance. The provision of modern, efficient office and commercial buildings is an important tool in attracting foreign direct investment.
Along with ensuring there is a steady supply of sufficient office space, the development of new office buildings creates employment in the construction industry. The knock on effect would be felt in the wider economy. Smaller rent rises, more jobs created both in construction and in the economy over all.
The barriers that stand in the way of building must be tackled. There is a lack of finance available. Banks are only willing to lend 60% of the funding to finance a project. It is therefore necessary to source the final 40% elsewhere, often at high interest rates sometimes making the final cost unsustainable.
Planning can be a long and difficult process. Areas such as Dublin Docklands have been designated Strategic Development Zones (SDZ) to make the planning process a more straight forward one. Thought should be given to extending the SDZ to reduce the red tape involved in the planning process.
A steady supply of modern, high spec office developments is in all our interests if we wish the recovery and job creation to continue. Those barriers which stand in the way need to be tackled in order that they do not slow down our progress to date.