Momentum in the Cork office leasing market continues at pace, with take up for first the first nine months of 2018 achieving record levels. The third quarter saw 8,150 sq m of office space taken up, bringing the year to date total to 43,750 sq m, across 50 deals.
Three large deals dominated take up in quarter three, accounting for 83% of activity combined. Firstly, Dell EMC assigned 3,450 sq m to Voxpro at Blocks A & B, City Gate Park, Mahon, while Dornan Engineering took up Building 6 at Eastgate Business Park in Little Island, measuring almost 2,000 sq m. Finally, UTRC occupied just under 1,400 sq m at Penrose Wharf in the city centre. Notably, all space taken up in quarter three was of Grade A standard.
It is also important to note that a large chunk of year to date take up comprises the expansion by Apple into its new Hollyhill premises. However, the volume of deals transacting in Cork remains very robust and above-average. There is now every reason to believe that 2018 will be a record year for Cork.
However, crucially, availability in the Cork office market has declined over the past year, and now stands at 42,050 sq m. This represents an annual fall of 29% and has resulted in the vacancy rate falling to 7.2%, a level which is considered the market equilibrium vacancy rate. This compares to 10.5% in the same period in 2017. Furthermore, when signed and reserved space is excluded, the net vacancy rate falls even lower, to 5.5%. Notably, just one large, Grade A unit was available for letting in the city centre at quarter end.
With supply continuing on a downward trajectory, a point has now been reached in the Cork office market where the level of demand is outstripping supply for the first time since 2007. It is therefore vital that the pace of office development in Cork intensifies, to avoid chronic supply shortages and the vacancy rate falling to acute levels.
The volume of office space under construction in Cork remained stable in quarter three, at 21,800 sq m across three offices. With 87% of this pre-let, only 2,800 sq m remains speculative and available.
Positively, enabling works have commenced on site at the newly anticipated city centre office development, Penrose Dock. In total, planning permission is granted for approximately 185,000 sq m across the city and suburbs, with plans submitted for a further 27,000 sq m.
Commenting on the market, Deirdre O’Reilly, Senior Economist with Cushman & Wakefield said: "Robust demand for office space in Cork, combined with falling supply has brought the market to a tipping point, whereby take up is now exceeding the volume of available product for the first time in its current cycle. While pipeline office development for Cork is strong, it is crucial now that this potential is realised, in order to avoid hampering future activity in the market."
The highest of the regional centres at €350 per sq m, prime office rents in Cork city rose by 11% annually to quarter three and are now back to previous peak levels. Looking ahead, prime city centre rents are expected to remain stable for year end, with slight upward pressure of 1.4% forecast for 2019.
Office rents in Mahon were unchanged at €255 per sq m at the end of the third quarter, while prime suburban rents, albeit stable in quarter three at €185 per sq m, have witnessed growth of 5% annually.
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