The view from Google’s Dublin office Photo: MelFoody
International confidence has dramatically restored in the Irish economy following the Global Financial Crisis, driving demand for Irish assets and, in turn, pushing up office values.
Ireland’s real Gross Domestic Product (GDP) growth in 2014 was approximately
5% on the back of increased confidence supporting higher investment levels. Growth in 2015 is expected to be in the order of 4%, enough to comfortably
make it the strongest growing economy in the EU, where growth is set to be in
the order of just 1.5%.
At the same time, 2014 was a record year for the country’s investment property market, according to Knight Frank’s latest research. Transactions totalled €4.5
billion in 2014, more than double the €1.9 billion recorded in 2013.
The report predicts that the link between the economy and the office market is only going to get stronger, with the market’s performance increasingly powered by the country’s financial health, rather than changes in capital market expectations.
“Office take-up reached 2.48 million sq ft in 2014, a 28 per cent increase on 2013 and the highest level seen since 2007,” reports Knight Frank. A rise in the number of deals was the main driver of take-up, with 228 agreed over the course of the year, compared to 190 in 2013.
The Dublin market is now dominated by the Technology, Media and Telecommunications (TMT) sector which accounted for four of the five top deals
and for approximately half of take-up in 2014.
“Tenant demand continues to be concentrated in the city centre,” notes the report, with low availility expected to encourage take-up of office space in the suburbs.
The lack of office supply has also put upward pressure on prime city rents, which rose from €35.00 psf to €47.50 psf in 2014.
Knight Frank forecasts the pace of rental growth to moderate in 2014, with rents forecast to be between €55.00 and €57.50 by year’s end, which would represent a year-on-year growth of at least 16 per cent in 2015, down from the 36 per cent annual rise recorded in 2014.