DTZ Sherry FitzGerald sees demand for good quality office space in the city

Following strong performance over the course of 2015, which saw leasing activity in the Galway office market reach its highest level since 2007, the opening quarter of 2016 saw a more moderate level of activity according to DTZ Sherry FitzGerald. Take up in the three months to March totalled 2,600sq m, up 15 per cent on the previous quarter, however 28 per cent below the long-run quarterly average. The demand and supply imbalance that was evident in the Galway office market during 2015 persisted into the opening quarter of 2016. Availability remains at record low levels, with a corresponding low volume of overall take up.

The total volume of take up in quarter one comprised just three deals. The development of Block 4 at Parkmore, located in the suburbs, completed construction during the quarter; within this the multinational software company SAP took approximately 1,500sq m of space over two floors, while Fidelity Investments took the remaining 750sq m. Furthermore, 350sq m of space was occupied by SuperPixel Labs at Fairgreen House in the city centre. Such immediate take up levels reflect the demand for Grade A office space in the Galway market.

Additionally, serviced office accommodation has been performing well. Gray Office Park, a local serviced office provider reported a 95 per cent occupancy level at the end of Q1. Demand in this sector is growing stronger due to the shift in the working office environment and requirement for small to medium sized companies.

Total take up in the 12 months to quarter one stood at 11,300sq m, down 39 per cent on the same period the previous year. This subdued level of year on year take up activity is attributable to the lack of available good quality office space to meet demand requirements.

The suburbs remain the most popular location for leasing activity, accounting for 56 per cent of take up in the year to quarter one. The remaining 44 per cent of space was occupied in the city centre.

Tenant demand remains focused on Grade A space, accounting for 95 per cent of all take up in the 12 month period. In particular, Grade A1 space accounts for 75 per cent of overall activity. Subsequently, the supply of Grade A space continues to erode rapidly. Net of signed and reserved space, just 6,500sq m of Grade A space is currently available in Galway city and suburbs, compared with 11,700sq m in the same period last year. This spans across just 13 units, only one of which is greater than 1,000sq m in size.

The total quantity of available office space in Galway edged upwards slightly in the first quarter of 2016 to stand at 14,200sq m, an increase of five per cent on the previous quarter. This was as a direct result of a modest increase in second hand space being released to the market in the three month period. However, this compares to 22,750sq m in quarter one of 2015 and availability still remains 63 per cent off the long-run average.

Net take up, which measures the change in occupied space, has been positive over the past two years. This highlights that leasing activity continues to outweigh supply levels and there exists a lack of sufficient second hand space on the market to meet occupier demand. Furthermore, any new space that completed construction during the quarter was immediately taken up and, as such, did little to address the shortage of space that is available in the Galway office market at present.

The vacancy rate in the Galway office market edged upwards to 4.7 per cent in quarter one of 2016, from the record low of 4.5 per cent recorded in the final quarter of 2015. However, this compares to 7.5 per cent recorded in the opening quarter the year previous and is by in large the lowest vacancy rate of all the regions.

In the suburbs, the low vacancy rate is more pronounced and, net of signed and reserved space, stood at just 3.7 per cent at the end of quarter one. There is just 8,000sq m of space currently available for letting in the Galway suburbs, 5,000sq m of which is the best quality Grade A space.

The opening quarter saw no new construction commence in the Galway office market. However, IDA is currently seeking tenders for developers and investors to build an approximate 4,200sq m building at the IDA Parkmore East Business Park in the suburbs. The building has already been designed with planning secured. The IDA is also currently tendering for the development of a 1,900sq m building at Dangan Business Park.

Prime headline rents in Galway remained unchanged in quarter one of 2015, standing at €220 per sq m, however, rents were up 14 per cent year on year. Notably in the suburbs, rental levels for the best quality office space are achieving as high as €178 per sq m; this compares to €129 per sq m in the comparable quarter last year.

Advertisement

 

Page generated in 0.0961 seconds.