q4 office bulletin 2011 final

8/13/2019 Q4 Office Bulletin 2011 FINAL

1/8

CBRE

2012, CBRE

www.cbre.ie Q4 2011

Dublin Office

OVERALL COMMENTARY

Office letting activity in Dublin performed well in Q4 2011, with 58 of the 176 individual lettings completed in the

city during 2011 being signed in Q4. In total, 35,588m2of office lettings were signed in Dublin during the period.

This brings total take-up in the Dublin office market in 2011 to an impressive 162,509m 2which represents a

24% increase in letting activity in the capital compared to the previous year and more than double the level of

take-up achieved in the Dublin market in 2009. The fact that office take-up in the capital in 2011 was consistent

with the ten year average level of letting activity in Dublin is encouraging considering the economic backdrop

in Ireland and the Eurozone generally. Although there was no discernible decline in occupier appetite for

Dublin office accommodation in the fourth quarter of 2011, it remains to be seen if the volume of demand and

outstanding requirements will be maintained in 2012 and if take-up holds up. With many corporates likely to

curtail their expansion and relocation requirements until such time as the economic climate is more certain,

we anticipate that total take-up in the Dublin office market may decline to approximately 130,000m2in 2012.

The majority of office transactions signed in the Dublin market in 2011 comprised 10 year lettings with break

options at Year 5. Most also included some element of rent-free. A trend that has emerged over the course

of the last year is that an increasing number of companies are exercising break options in lease contracts.

62% of the office lettings signed in Dublin during Q4 2011 were located in the city centre. Total take-up of

13,594m2was signed in the suburbs in Q4, although this was down almost 20% compared to the previous

quarter and was buoyed by a small number of larger transactions.

Despite the fact that the development pipeline is now firmly halted and take-up is continuing at a healthy pace,

the headline vacancy rate for Dublin offices actually increased slightly in Q4 2011 to almost 23% with over

830,000m2of office accommodation being officially marketed to let in the Dublin market at the end of the fourth

quarter. Although underlying levels of take-up continues to remove some stock from the market, net absorption

is low and incidences of availability continue to materialise as companies consolidate operations and attempt

to let or sublet excess accommodation. Our research indicates that over 70% of the office accommodation

being marketed to let in Dublin at year end was classed as Grade A accommodation. However, almost 50%

of this Grade A vacant stock is located outside of the city centre while much of the Grade A accommodation

in the city centre comprises floors in otherwise occupied buildings as opposed to large concentrations of

accommodation in individual buildings.

Following a year in which there was very limited transactional activity in the office investment sector, the

announcement during Q4 in Budget 2012 that the Government will not now be proceeding with controversial

retrospective rent review reform was broadly welcomed. This coupled with a welcome reduction in the rate of

stamp duty from 6% to 2% along with a capital gains tax waiver on properties purchased before the end of

2013 should stimulate transactional activity and stabilise capital values in the investment sector of the market

in 2012.

Dublin Gross Take-Up Q4 2009 Q4 2011

Quick Stats Q4

Hot Topics

Office take-up in Dublin in2011 reached 162,509m2, up24% year-on-year

35,588m2of office take-up wassigned in Q4 in 58 individuallettings

The vacancy rate in the capitalremains stubbornly high,standing at just under 23%at year-end having increasedslightly in the last quarter ofthe year

The scarcity of Grade Abuildings that was beginning toemerge in the Central BusinessDistrict will be alleviated bygood quality second-hand

office buildings coming backon the market to re-let

Prime headline quoting rentsremained stable at 323 persquare metre (30 per sq ft)in Q4 2011 but are expectedto fall slightly to approximately

296 per m2in 2012 beforeultimately stabilising

An increasing numberof companies are now

implementing break clauses inlease contracts

Change from previous quarter

Availability

Take-Up

Investment

Prime Rents

Yields

Source: CBRE

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011 Q4

SqMetres

City Centre Suburbs


2/8

0

10,000

20,000

30,000

40,000

50,000

60,000

Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011

SqM

0

50,000

100,000

150,000

200,000

250,000

300,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

SqM

0

0.05

0.1

0.15

0.2

0.25

VacancyRate

Take-Up Vacancy

Dublin Annual Gross Office Take-Up vs. Vacancy2000 To 2011

36%

9%

14%

3%

3%

18%

17%

Business Services

Financial Services

Computers/Hi-Tech

Manufacturing, Industrial& Energy

Professional

Public Sector/Regulatory

Consumer Services & Leisure

Dublin Gross Office Take-up by Occupier TypeQ4 2011

Dublin Q4 Office Take-Up 2007-2011

Q42011

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2012, CBRE

Ma

rketView

DublinOffice In total, there were 58 office lettings, extending to

35,588 m2signed in the Dublin office market during Q4

2011. 21,994 m2or 62% of overall office take-up in Q4

occurred in the city centre while the suburbs accounted

for the remaining 38% or 13,594 m2of lettings signed

in Dublin in the period. 90 of the 176 lettings signed in

Dublin in 2011 were to Irish companies; 38 lettings were to

US companies; 11 lettings were to UK companies with the

remainder of lettings being to occupiers from a range of

other jurisdictions.Our research indicates that 52% of the office take-up in

Q4 comprised lettings of smaller than 929 m2in size.

10% of the quantum of accommodation let in the period

were lettings extending to between 929 m2and 1,858m2

in size while a quarter of Q4 office take-up in the capital

comprised lettings of between 1,858m2and 4,645m2

in size. There were no lettings of more than 9,290m2

(100,000 sq ft) signed in Dublin in the last quarter of the

year. Some of the more significant office lettings signed in

Dublin during the period include the letting of 4,961m2to

UCD at Blocks 9 and 10 at Belfield Office Campus and the

letting of 3,902m2to Mastercard at Number One Central

Park in the south suburbs.Despite the fact that take-up performed well, the overall

vacancy rate in the capital increased from 22.5% to just

less than 23% between Q3 and Q4 2011. Although Dublin

is unique in European terms due to the complete lack

of new development in the office sector, older office

buildings which are being vacated in favour of newer

alternatives continue to be added back into the vacant

stock. In addition, many companies are attempting to

sublet or assign excess accommodation at present and

this is maintaining the overall level of vacancy at relatively

high levels despite the underlying level of letting activity.

The word vacancy is an anomaly on the basis that not

all of the accommodation being marketed to let is actuallyvacant with many companies attempting to sublet or

assign excess accommodation in the current climate.

According to our research, there was approximately

830,000m2of office accommodation being marketed to

let in the capital at year-end 2011. There are significant

variations at a district level and the stock of Grade A

accommodation continues to decline in all locations

although this trend may reverse to some extent in 2012

and beyond as some good quality second-hand buildings

come back on the market to re-let.

Demand for office space in Dublin increased in Q4

2011 compared to the previous quarter. There was

approximately 105,000m2

of outstanding requirements foroffice accommodation in Dublin at then end of the quarter,

with almost 60% focussed on Dublin city centre.

It remains to be seen if demand levels will hold up over the

coming quarters with some decline inevitable considering

the economic climate and ongoing concerns at a

Eurozone level.

Tenants in the business services sector accounted for

the greatest proportion of office lettings signed in Dublin

during Q4 2011, accounting for 36% of lettings in the

capital in the period. The public sector and consumer

services sectors accounted for 18% and 17% of office

take-up in Dublin in Q4 respectively while the computers

and high tech sector accounted for 14% of letting activityin the period. Tenants in the financial services sector

accounted for 9% of lettings signed in Dublin during Q4.


3/8


4/8

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

SqM

North Suburbs South Suburbs West Suburbs

13%

42%

45%

North Suburbs

South Suburbs

West Suburbs

Suburban Vacant Stock by Location Q4 2011

54%14%

12%

4%

1%

15%

Business Services

Financial Services

Computers/Hi-Tech

Manufacturing, Industrial& Energy

Professional

Consumer Services & Leisure

Suburban Office Take-up by Tenant Category Q42011

Suburban Quarterly Office Take-up Q4 2009 Q4 2011

Q42011

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2012, CBRE

Ma

rketView

DublinOffice

SUBURBAN MARKET

There were 13,594m2of lettings signed in the Dublin

suburban office market in Q4 2011, which is a healthy level

of quarterly take-up in the suburbs. The south suburbs

accounted for 52% of overall suburban office take-up

in Dublin in the three month period. The west suburbs

accounted for a further 25% of take-up in Q4 while the north

suburbs accounted for the remaining 23%.

The most significant lettings signed in the suburbs in the

fourth quarter of the year included the letting of 3,902m2to

Mastercard in Number Central Park in the south suburbs

and the letting of 1,867m2at Block 19 in Park West in the

west suburbs to Allianz.

There were 23 office lettings signed in the Dublin suburbs in

Q4 2011. Business services tenants accounted for 54% of

suburban take-up in Q4, while consumer services tenants

accounted for the next largest component of suburban

take-up in the quarter at 15%. Financial services tenantsaccounted for 14% of letting activity in the suburbs in the

period while computers/hi tech tenants accounted for 12%

of take-up in the suburbs of the capital in the last quarter of

2011.

At the end of Q4 2011, total vacant office stock in the

Dublin suburbs stood at 337,915m2. There was a slight

increase in the vacancy rate in the suburbs overall in the

three months to the end of Q4 2011. Total vacant stock in

the south suburbs stood at 141,551m2in Q4 2011, bringing

the vacancy rate there to 14%, compared to 14.4% at the

end of Q3. The South Suburbs is the only district of Dublinwhere the office vacancy rate declined quarter-on quarter.

Demand for suburban office accommodation stood at over

27,000m2as of the end of Q4 2011, compared to 25,000m 2

the previous quarter. Prime headline quoting rents for office

accommodation in the south suburbs were in the order of

172 per square metre at year end compared to 151 per

square metre in the north suburbs and 134.50 per square

metre in the west suburbs of the city.

Headlines

Suburban take-up accounted for 38% of overall Dublin lettingactivity in Q4

South suburbs most active suburban office district accountingfor 52% of suburban take-up in the quarter

Vacancy in the Dublin suburbs overall increased slightly in Q4to 23.05%

Vacancy in the south suburbs decreased slightly in Q4 to14.0% down from 14.4% last quarter


5/8

0

1,000

2,000

3,000

4,000

5,000

6,000

Q32001

Q12002

Q32002

Q12003

Q32003

Q12004

Q32004

Q12005

Q32005

Q12006

Q32006

Q12007

Q32007

Q12008

Q32008

Q12009

Q32009

Q12010

Q32010

Q12011

Q32011

(000's)

SquareMetres

0.0

2.0

4.0

6.0

8.0

10.0

12.0Western Europe CEE EU-15 Vacancy Rate EU-27 Vacancy Rate

-15%

-10%

-5%

0%

5%

10%

15%

S

ep-

01

S

ep-

02

S

ep-

03

S

ep-

04

S

ep-

05

S

ep-

06

S

ep-

07

S

ep-

08

S

ep-

09

S

ep-

10

S

ep-

11

100=J

anuary2000

-150

-100

-50

0

50

100

150

200

250

300% Change pa Nominal Terms Index

EU Office Rent Index Q3 2001 Q3 2011

0

10

20

30

40

50

60

Belgrade

Sofia

Kyiv

StPetersburg

Bucharest

Budapest

Dublin

Zagreb

Frankfurt

Moscow

Amsterdam

Prague

Madrid

Helsinki

Bratislava

Warsaw

Barcelona

Dusseldorf

Milan

Brussels

Berlin

Munich

Hamburg

Vienna

LondonCity

Paris

LondonWE

%ofCurre

ntTotalStock

Development Pipeline to end 2012 Current Vacancy Rate

European Vacancy & Supply Pipelines Q3 2011

EUROPEAN OFFICE MARKET

Aggregate take-up in the main European office markets

in Q3 2011 was roughly stable on both a quarterly and

annual basis. Demand patterns remain irregular however,

with falls in a number of cities like Frankfurt and Milan

counterbalanced by notable upturns in Paris and London.

Across all markets, there is mounting evidence that

occupier sentiment is deteriorating in response to the

uncertain economic outlook.

Having declined for two consecutive quarters, the CBRE

EU 27 Vacancy Rate Index rose marginally by 5 basis

points from 10.2% to 10.25% in Q3 2011. This primarily

reflected increases in a number of large markets such as

London, Frankfurt and Madrid. Conversely, the vacancy

rate has continued to trend downward in Moscow and to

a lesser extent, in Paris. Within each market, as is clearly

the case in Dublin, a growing proportion of vacant space

is concentrated in inferior quality buildings as occupiers

release poorer quality accommodation back onto the

market.

As in the previous quarter, most European markets saw

no change in prime rents over the third quarter. The CBRE

EU 27 Office Rent Index rose by just 0.1% in the quarter.

Moscow was one the few markets to buck the trend and

saw rents rising by 9.5% in the quarter. Despite the softer

rental growth outlook, the polarisation of rents between

prime and secondary buildings is expected to continue.

Most offices markets are now seeing very low levels of new

office completions at this point of the development cycle,

with total completions in Western Europe in 2011 expected

to run close to levels last seen in the mid 1990s. Withfew exceptions, aggregate completions are expected to

remain low also through 2012. 2013 is unlikely to bring any

major change, reflecting the weakness of current starts as

development finance remains restricted and rents remain

below levels to justify speculative development. Dublin is

the only market where there is no new speculative office

development underway.

Q42011

Page 5

2012, CBRE

European Office Take-Up Q3 2001 Q3 2011

MarketView

DublinOf

fice

Headlines

Leasing activity stable in the Eurozone although signs ofweakening occupier sentiment fuelled by uncertainty from thesovereign debt crisis

EU 27 vacancy level edges up slightly to 10.25%

Prime rents flat across the region

Completions close to the their cyclical lows


6/8

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2003 2004 2005 2006 2007 2008 2009 2010 2011

Billions

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

London-Central-WestEnd

Zurich

Geneva

ParisIle-de-France

Stockholm

Munich

Hamburg

Copenhagen

Frankfurt

Berlin

Dusseldorf

Oslo

Vienna

Milan

London-

Central-City

Amsterdam

Helsinki

Rome

Barcelona

Madrid

Manchester

Birmingham

Edinburgh

Glasgow

Brussels

Warsaw

Prague

Budapest

Dublin

Lisbon

Current Yield Cyclical Low Cyclical High

Prime Office Yields Q4 2011 vs High/Low ofCurrent Cycle

-20

-15

-10

-5

0

5

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

%

To ta l Re tu rn s Capital Va lue Growth

IPD Irish Capital Value & Total Returns Q4 2008 Q4 2011

Irish Investment Spend 2003 2011

Q42011

Page 6

2012, CBRE

Ma

rketView

DublinOffice

INVESTMENT

In clear contrast to the occupier sectors of the Irish market,

where take-up in 2001 was boosted by tenants taking

advantage of the ability to negotiate favourable lettings

with landlords and letting activity continued at pace, the

investment sector of the Irish commercial property market

was effectively on hold for 2011. With huge uncertainty

around the issue of rent review reform and debt largely

constrained, there were only eight investment transactions

totalling approximately 187.8 million completed in the Irish

market during the year. 4 of the 8 investment transactions

concluded in Ireland in the 12 month period comprised

office investment transactions with the only office

transaction to sign in Q4 being the sale of Wilson House in

Dublin for approximately 6.125 million.

Two significant office investment assets were brought to

the market towards the end of 2012 and there was genuine

appetite from a range of potential buyers (mostly overseas)

for these assets although neither sale had completed by

year-end so these sales will ultimately be recorded as 2012

transactions. The announcement in Budget 2012 that the

Government no longer intend pursuing retrospective rent

review reform was broadly welcomed by the investment

community and along with a capital gains tax waiver

on properties purchased before the end of 2013 and awelcome reduction in the rate of stamp duty on commercial

properties from 6% to 2% should stimulate transactional

activity and boost values over the course of 2012.

Indeed, according to the Investment Property Databank

(IPD), total returns in the Irish market increased by 2.8% in

the final quarter of 2011, while capital values increased by

0.2% in the period. For the year as a whole total returns

in the Irish investment market fell by 2.4% while capital

values declined by 11.4% in 2011. 2012 will see this trend

of declining values reverse and commercial property values

starting to stabilise.

Prime yields are expected to strengthen once there is

meaningful transactional evidence although secondary

yields are expected to remain under pressure considering

that investor appetite is firmly focussed on prime

opportunities.

Headlines

One small office investment completed in Dublin in Q4 2011

Welcome measures in Budget 2012 for the investment sector

Capital values expected to stabilise in 2012


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Vacant Office Stock by District Q4 2011

-

50,000

100,000

150,000

200,000

250,000

300,000

Dublin 2/4 Dublin1/3/7

SouthSuburbs

WestSuburbs

NorthSuburbs

Dublin 6/8 IFSC

SqM

Grade A Secondary In Need of Significant Refurbishment Georgian

50records

76records

32

123

7

77records

56

88records

19

41records

12

13records

17records

63

Q42011

Page 7

2012, CBRE

MarketView

DublinOf

fice

DUBLIN OCCUPATIONAL MARKET STATISTICS

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

Take-up 46,449M2 49,447M2 34,149M2 43,215M2 35,588M2

Overall Vacancy Rate 23.6% 23.0% 22.8% 22.5% 22.96%

City Centre Vacancy Rate 24.0% 23.0% 23.0% 22% 23%

Dublin 2/4 Vacancy Rate 19.5% 17.4% 17.3% 16.3% 16.8%

Suburban Vacancy Rate 22.9% 22.9% 22.8% 22.9% 23.05%

South Suburbs Vacancy Rate 15.3% 14.7% 14.5% 14.4% 14.0%

Office Investment Spend 5.65 million 124.5 million 149.25 million 0 million 6.125 million

Prime Yield 7.25% 7.25% 7.5% 7.5% 7.5%

MAJOR DUBLIN OFFICE LETTINGS Q4 2011

Occupier District Size (M2) Property

Floors 9 & 10, Belfield Office Campus, Dublin 4 Dublin 2/4 4,961 UCD

Number One Central Park, Sandyford South Suburbs 3,902 Mastercard

Scotch House Dublin 2/4 2,989 Eden College

Block 19, Park West West Suburbs 1,867 Allianz

63/66 Amiens Street Dublin 1/3/7 1,577 Cluid Housing Assoc

Block 1, The Oval, Ballsbridge Dublin 2/4 929 Avalon

Ground Floor, Block 3030, Citywest West Suburbs 894 Hidden Hearing

Fitzwilliam Court, Leeson Close Dublin 2/4 864 Leargas


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DISCLAIMER 2012 CBRE

Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and makeno guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Anyprojections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of themarket.

This information is designed exclusively for use by CBRE clients, and cannot be reproduced without prior written permission ofCBRE Ireland.

MANAGING DIRECTOR

Guy Hollis

TENANT ADVISORY SERVICES

Paddy Conlon

Sarah Ward

OFFICE AGENCY

Willie Dowling

Darren Nugent

Alan Moran

Paddy Cormican

DEVELOPMENT CONSULTANCY

Wesley Rothwell

EMAIL

[email protected]

CB Richard Ellis

Burlington Road

Dublin 4

Ireland

t: +353 1 618 5500

Marie Hunt

Executive Directore: [email protected]

Elaine Linnane

Database Managere: [email protected]

For more information regarding the MarketView, please contact:

CBRE Dublin Research

Q42011

Page 8

2012, CBRE

Ma

rketView

DublinOffice

Nationality of Office Occupiers 2011

11%(20 lettings)

3%(6 lettings)

6%(11 lettings)

6%(11 lettings)

22%(38 lettings)

52%(90 lettings)

Irish

US

UK

Unknown

French

Other

q4 office bulletin 2011 final

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