Prime re­gional of­fice rents set to rise in third quar­ter

Irish Independent - Business Week - - COMMERCIAL PROPERTY - Donal Buck­ley

PRIME of­fice rents in the three re­gional cities are ex­pected to grow in the sec­ond half of this year af­ter sec­ond-quar­ter pauses in Cork and Lim­er­ick.

Gal­way recorded the strong­est growth in re­gional of­fice rents dur­ing the sec­ond quar­ter, ac­cord­ing to the lat­est of­fice mar­ket re­port from Cush­man & Wake­field.

In Gal­way, rental lev­els for prime of­fice space in­creased by 7.6pc from quar­ter one, stand­ing at €269 per sq m per an­num, and are ex­pected to ap­proach €296 per sq m for the lat­ter half of the year.

Rents for prime sub­ur­ban space strength­ened marginally in the quar­ter, by 2.7pc, to €188 per sq m.

In Cork, prime head­line city cen­tre rents re­mained un­changed in quar­ter two, at €315 per sq m, which it­self was 8.6pc above June 2016 lev­els.

The firm fore­casts that they could rise to €325 per sq m by the end of this year. Prime sub­ur­ban rents rose 2pc in quar­ter two, while rents in the south­east sub­urb of Ma­hon re­mained sta­ble, at €255 per sq m.

Lim­er­ick saw the strong­est level of ac­tiv­ity of the three cities. Nev­er­the­less, its city cen­tre prime head­line rents re­mained sta­ble dur­ing the sec­ond quar­ter at €215 per sq m.

De­liv­ery of new Grade A spec­u­la­tive builds could lift rents in the sec­ond half of the year. The sub­urbs saw un­changed rents, which are in line with the city cen­tre at €215 per sq m.

Grade A avail­abil­ity and va­cancy rates con­tinue to fall across all mar­kets and the short­age of th­ese types of of­fices is most acute in Gal­way.

In Cork, fol­low­ing a slug­gish open­ing quar­ter, take-up in the sec­ond three months recorded a three­fold in­crease to 3,900 sq m (41,979 sq ft), bring­ing first half take-up to 5,150 sq m (55,434 sq ft).

This com­pares to 13,750 sq m (148,000 sq ft) recorded in the com­pa­ra­ble pe­riod last year, with per­for­mance con­tin­u­ing to be re­stricted by a lack of large, prime space. The largest let­ting saw FMC take 1,250 sq m (13,454 sq ft) at 11 East­gate Av­enue, Lit­tle Is­land.

At the new Capi­tol project on Grand Pa­rade, Alien Vault took up 950 sq m (10,225 sq ft), and Huawei 550 sq m (5,920 sq ft). By June, 30pc of the Capi­tol of­fices had been taken and since then a fur­ther 59pc is now ei­ther signed or re­served. With fur­ther spec­u­la­tive schemes in the pipeline, this should help im­prove sup­ply and boost ac­tiv­ity.

Avail­abil­ity in Cork is now at its low­est since 2008 and to­tal avail­able space, net of signed and re­served, stood at 42,300 sq m (455,313 sq ft) in June. This re­duces Cork’s net va­cancy rate from 9.7pc last year to 7.4pc.

Some­what un­usu­ally, the pro­por­tion of avail­able space is lower in the sub­urbs than the city cen­tre, with a 45pc and 55pc share, re­spec­tively.

De­spite com­ple­tion of two city cen­tre builds, Grade A avail­abil­ity de­clined and when dis­card­ing signed and re­served space, net grade A avail­abil­ity fell to 30,200 sq m (325,070 sq ft).

Con­struc­tion broke ground at Nav­i­ga­tion Square in Cork dock­lands in June. Ex­tend­ing to 28,800 sq m (310,000 sq m), Nav­i­ga­tion is ex­pected to be the largest of­fice devel­op­ment out­side Dublin. A fur­ther 130,850 sq m (1.4m sq ft) of space is in the plan­ning pipeline.

In Lim­er­ick, ac­tiv­ity damp­ened in the sec­ond quar­ter, mainly ow­ing to lack of larger floor plates. Only two let­tings were seen amount­ing to a combined 500 sq m (5,381 sq ft).

Over the first half to­tal takeup amounted to 5,550 sq m (59,739 sq ft), or more than dou­ble the cor­re­spond­ing pe­riod of 2016 thanks in part to the ex­ten­sion of the Vis­takon build­ing at the Na­tional Tech­nol­ogy Park.

Lim­er­ick’s sub­urbs ac­counted for over two-thirds of ac­tiv­ity dur­ing the 12 months to June, while 26pc was oc­cu­pied in the city cen­tre with the re­main­der in Shan­non. Fur­ther­more, Grade A space dom­i­nated, ac­count­ing for 85pc of ac­tiv­ity.

While over­all avail­able space in­creased to 74,500 sq m (801,911 sq ft), the city cen­tre suf­fers from a short­age of largescale, Grade A plates, with only one Grade A build­ing greater than 1,000 sq m (10,763 sq ft) in size cur­rently avail­able. There are no of­fice build­ings suit­able for ac­com­mo­dat­ing 5,000 sq m (53,819 sq ft) re­quire­ments.

Lim­er­ick re­mains the most ac­tive of the three re­gional cen­tres in terms of the quan­tum of new de­vel­op­ments, with work con­tin­u­ing on 24,800 sq m (266,944 sq ft) across three schemes.

Gal­way’s mar­ket was also con­strained by lack of space. Only three deals saw a to­tal of 900 sq m (9,687 sq ft) trans­act­ing dur­ing the sec­ond quar­ter.

The HSE took 550 sq m (5,920 sq ft) at Geata an Eolais, on Univer­sity Road in the city cen­tre.

In the 12 months to June just 5,400 sq m (58,125 sq ft) has trans­acted com­pared to 7,500 sq m (80,729 sq ft) in the same pe­riod last year.

En­cour­ag­ingly, sev­eral man­dates are ac­tive and 4,950 sq m (53,281 sq ft) are ei­ther signed or re­served at the end of June. Over­all sup­ply in­creased from 15,450 sq m (166,302 sq ft) to 28,950 sq m (311,615 sq ft) at the end of June 2017, due to the re­lease of sec­ond hand space.

How­ever, avail­abil­ity still re­mains 23pc below the lon­grun av­er­age.

The sub­urbs ac­counted for 66pc of avail­able space whereas the city cen­tre net va­cancy rate has dropped to 6.5pc.

Grade A stock ac­counted for just 28pc of avail­able space, net of signed and re­served space, Grade A avail­abil­ity has fallen by 38pc an­nu­ally, to stand at just 6,150 sq m (66,198 sq ft), with just one unit greater than 1,000 sq m (10,763 sq ft) in size avail­able in Gal­way at the end of June.

Con­struc­tion ac­tiv­ity has picked up and 4,300 sq m. of space got un­der­way at Park­more East bring­ing to­tal con­struc­tion at the end of June to 10,800 sq m.

While this is a pos­i­tive step con­sid­er­ing the short­age, all of this space will be lo­cated in Gal­way’s sub­urbs and will do lit­tle to ad­dress scarcity of large of­fice floor plates in the city cen­tre.

In Cork, prime head­line city cen­tre rents re­mained un­changed in quar­ter two but fur­ther spec­u­la­tive schemes are set to boost ac­tiv­ity when they come on stream

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