A new ESRI report on office space availability in Dublin highlights the extent of FDI activity over the last few years and notes that lengthy waiting periods now face large companies looking to set up shop there.

The ESRI paper draws on data furnished by JLL, which found that in Q2 2015, the vacancy rate for Dublin office space was at its lowest level since JLL began measuring vacancy rates in 2001.

It also notes that close to 70% of the take-up of office space in the first half of 2015 was by new and existing FDI companies.

Dublin comprises 40 million sq ft of modern office stock, which is comparable in size to UK regional cities like Manchester, the report states. However, no new office space has been delivered to the Dublin market for the last five years.

In Association with

“There are a number of schemes where building activity has started, with 1.4 million sq ft currently under construction in the city centre, of which 40% is pre-let,” according to the ESRI report.

“The first new office building is likely to be delivered in Q1 2016 and this is already pre-let. The market needs an increase in speculative development to meet the strong demand, with JLL forecasting take-up of 1.6 million sq ft per annum for the next five years.”

Preferences

FDI firms accounted for 60% of office take-up per annum in Dublin over the last five years, with companies showing a preference for south Dublin city centre locations, particularly the Dublin 2 and Dublin 4 geographies.

According to the ESRI, a particular trend in the last number of years is an increase in small tech-based companies looking to start up in Ireland.

“Generally, their initial requirements are for a small amount of space in serviced office centres or short-term leases,” notes the report.

“In a number of instances, their requirements have quickly evolved to incorporate quick growth and expansion. Speed and timing of expansions is dependent on individual occupiers but in some instances tech-based FDI companies have quadrupled in size by the end of their first five years in Ireland.

“Given the nature of the expansion by these FDI businesses, and in particular tech companies, the availability of flexible leases would enable them to respond quickly to their growth in size.”

However, the ESRI concludes that a company wanting to set up or relocate to a facility in Dublin for more than 500 people is looking at a delay of at least until Q1 2017 to occupy a suitable building. “In contrast, in 2013 there would have been seven suitable buildings to choose from.”

The report, which was authored by David Duffy and Hannah Dwyer, continues: “Ireland is still one of the top countries in Europe for attracting investment with good talent, tax and a track record.

“For Ireland to remain in this position, it is imperative that future growth is not constrained by the availability of commercial property.”