A new report by international property consultants, Savills shows there has been a surge in office ‘pre-letting’ – the practice of tenants committing to lease contracts before a building has even been constructed.
Savills notes that rents for pre-let offices are currently trading at a discount to rents on space for immediate occupation. This reflects the fact that some developers may be willing to offer competitive rent deals to ensure their projects get funded and completed within the current cycle.
Looking ahead, however, this trend may begin to reverse as completions of speculatively built office blocks provide more tangible competition for pre-lets.
According to Savills’ research, pre-lets accounted for 28,000 sq m (44%) of all the Dublin office space leased in the fourth quarter 2016. In Dublin 2 and 4, where the demand for business space is hottest, pre-lets accounted for an even greater proportion of the market – 61%. Moreover the proportion of pre-lets in the market has steadily increased over the last two years.
Savills Chairman, Roland O’Connell says that pre-letting is emerging because it delivers benefits for all parties in the current market.
"Although enough Grade A space is available to accommodate around 2,200 office workers, occupiers with large space requirements or very specific locational preferences are facing an increasingly limited choice of buildings," he says, "Pre-letting opens up a wider set of possibilities for tenants and some are willing to forego immediate occupancy in return for buildings that tick the right boxes in terms of location, fit and finish.”
Source: www.businessworld.ie
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