q4 office bulletin 2011 final
TRANSCRIPT
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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
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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
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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.
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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
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rketView
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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
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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
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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
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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
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2012, CBRE
Ma
rketView
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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
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2012, CBRE
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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
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