Dublin’s fifth office development boom reached its peak during 2009 marked by the completion of over 172,000 sq.m. of space, a 4 per cent increase on the previous year. In fact, this was the third highest recorded quantity of space to be developed in a single year, outstripped only by 2001 (263,870 sq.m.) and 2002 (177,800 sq.m.).
However, it is clear that the figure for 2010 will be significantly lower than for 2009, probably at around 100,000 sq.m., a reduction of some 40 per cent on last year, marking the end of the boom.
An interesting feature of recent developments was the increasing scale of individual schemes. Fifteen developments completed between early 2007 and late 2009 each accommodated over 10,000 sq.m. of floorspace. Together, they added over 260,000 sq.m. to the city’s office stock, a figure which equals the total of all the 85 developments completed between 1960 and 1972.
This increasing scale of schemes is reflected in the tendency for the number of development schemes to diminish over recent years. The figure shows that while the number of schemes reaching completion has reduced during the 2000s, the quantity of floorspace being developed remained high.
Thus, the average size of development due for completion in 2010 is 11,200 sq.m. compared to 2,513 sq.m. in 2001, a figure which differs little from the average development size in 1981 (2,364 sq.m.) or 1991 (2,709 sq.m.).
This increasing scale was in part a response to the increasing demand by certain companies for larger office units. For example, during 2006 there had been over 50 transactions each involving more than 1,000 sq.m. of office space. However, the increasing scale is also a clear indication of the growing confidence and the greater risks that developers and their financial backers were prepared to take as the market heated up. In 2009, only 14 transactions concerned take-up greater than 1,000 sq.m..
The development boom since 1995 has dramatically altered the geography of Dublin’s office stock. While in 1995 only 14 per cent of the stock was suburban, this had increased to 35 per cent by the end of 2009. Meanwhile, the proportion located in Dublin 2 fell from 54 per cent to 32 per cent.
Again, the willingness of developers and their financier to countenance locations outside the prime office core is a reflection of their confidence in the office boom in addition to the growing demand for space in more marginal locations.
In fact, the demand for space kept up relatively well through the period of the fourth and fifth development booms, reaching a peak in 2007 when 297,240 sq.m. was taken up.
Thereafter, take-up reduced dramatically and, in 2009, just 72,000 sq.m. was taken up, marking a 66 per cent reduction on the figure for 2008 and less than a quarter of the demand recorded in 2007.
Perhaps surprisingly, suburban take-up (at 42 per cent of the total) actually held up rather better than elsewhere, the figure exceeding what could be expected from the proportion of the total stock located there (36 per cent).
Nevertheless, the scale of completions in 2009 far outstripped demand.
Inevitably, vacancy levels rose. By the end of 2009, over 670,000 sq.m. of office space lay vacant. This figure was greater than the total stock of office space in 1980. It represents nine years of supply at 2009 take-up rates and, at prevailing occupancy rates, could accommodate some 33,500 staff.
About half of the total (53 per cent) lay in newly-completed buildings. Some 423,000 sq.m. (63 per cent of the total) had been vacant for more than twelve months.
Thus, from a historically very low vacancy rate which was recorded at 1.9 per cent in December 1999, the rate rose to 11.8 per cent by late 2001, then to 13.4 per cent in December 2007, to 15.7 per cent by the end of the following year and stood at 21.1 per cent in December 2009.
However, the citywide vacancy rate hides a number of interesting spatial variations.
Suburban vacancy accounts for half of the empty space in Dublin and the vacancy rate is suburbia is 30 per cent.
But the geographical variations in vacancy which typified recent years, with generally low inner-city rates and high rates of suburban vacancy, have also altered somewhat.
These have changed with geographical shifts in development activity (completions), the release of older space onto the market and changing patterns of take-up.
In the inner city, vacancy remains low in the International Financial Services Centre (IFSC). Indeed, this was the only office zone to register a reduction in its vacancy rate in 2009.
Vacancy in Dublin 2 rose to 15.5 per cent, to exceed the vacancy rate prevailing in the inner office fringe (Dublin 1, 7 and 8). This was occasioned by the release of older space and the completion of some large developments in the docklands.
Dublin 4 has also been typified by a rapid rise in its vacancy rate to 25 per cent, again due in large part by the completion of large new developments where 70 per cent of its vacant stock is located.
In suburbia, vacancy rates rose in all locations. Most noteworthy has been the increasing rate of vacancy in the north suburbs where 44,000 sq.m. was developed in 2008-9, the vacancy rate rising from 28 per cent at the end of 2007 to 46.5 per cent in December 2009.
A review of the location of floorspace that was vacant for over 12 months at the end of 2009 reveals the difficulty of finding occupiers for space in the western suburbs, in the inner-city fringe (Dublin 1, 7 and8) and for older space in Blackrock-Dun Laoghaire.
Indeed, a significant quantity of space in the western suburbs had been vacant for more than five years.