Irish Companies Struggling to Compete for Centrally Located Office Space

Dublin risks developing a two-tier commercial property market with multinationals in the desirable city centre and indigenous businesses increasingly pushed to the margins, one of Ireland’s biggest estate agents has warned

Lisney said a Brexit-related increase in demand would likely exacerbate the trend.

In its annual property review and outlook published, the estate agent said that more than 90pc of office space in the capital is occupied.

“Whilst it is encouraging to see Ireland continuing to attract FDI and major IT and financial services companies, continued demand for prime city centre locations from these businesses where vacancy rates are at among the lowest levels historically is causing rents to increase significantly,” Lisney chairman James Nugent said.

“With competition intense for available developments, lettings from blue-chip international companies taking significant amounts of space are more attractive to developers.

“This is leading to a perfect storm of sorts for indigenous Irish companies struggling to compete for the most centrally located office space.”

Market analysis by Lisney put the pace of construction about 50pc higher than the total space let last year – with 320,000sqm being built, compared to the 230,000sqm of office space let in the capital last year following a number of years of relative inactivity.

Lisney said 42pc of the space being constructed was already pre-let or reserved. It said Dublin vacancy rates fell below 10pc for the first time in 16 years in 2016.

“There is a real risk that with continued inward investment, with its resultant need for office accommodation in the central business district, that domestic companies will be forced to seek alternative office space in suburban locations where comparable space can be about half of city centre office costs,” Mr Nugent said.

“Brexit-related market activity will only accelerate the issue.”

Last week the Irish Independent reported that American insurance giant AIG had asked Michael Noonan how an application to move AIG European headquarters from London to Dublin would be viewed by the Government.

AIG’s chief financial officer, Sid Sankaran, the CEO of its consumer division, Kevin Hogan, and Declan O’Rourke, the head of AIG’s operations in Ireland, met Mr Noonan last month and broached the possibility of a move.

However, also last week, the head of Irish Life’s asset management division, which is one of Ireland’s biggest commercial landlords, said the demand for Dublin office space on foot of the Brexit vote may have been overstated.

Patrick Burke said the company had received more than 50 enquiries from companies looking to move here from the UK.

“Some of what’s come through already was already in train, or was significantly in train, and we’re talking about Irish operations who are increasing the size of their operations here from London bases,” Mr Burke said.

He said there were enquiries from “a couple of names” who did not already have a presence here and that it was too early to say how much office space would be required to house Brexit relocations.

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