New research shows that rent levels for office space in the prime Dublin office market have risen by 24% in the 12 months to June.

This was due to an "acute shortage" of Grade A office space, according to HWBC’s latest Office Market Review.

The review shows that rates for prime Grade A offices in Dublin City Centre rose 10% in the first half of the year to €50 per square foot.

Rents are forecast to reach at least €55 per square foot by the end of the year, the property firm said. 

HWBC said the continued rapid increase in rents is due to the fact that no new offices have been built in the past five years. 

Excluding pre-lets, there is less than 50,000 sq metres of new development underway in Dublin 2 and Dublin 4, it added.

Rents are expected to continue to rise until at least the end of 2017, when potential new supply will help the market stabilise. 

HWBC noted what it called the ambitious targets IDA Ireland has to increase foreign direct investment over the next five years and it said it remained concerned about the lack of new construction to accommodate new entrants and to allow companies already here to grow their headcount. 

Tony Waters, Investment Director at HWBC, said that the outlook for the office market in Dublin remains positive with the economy here expected to keep growing.

He said the IDA was rightly concerned about the impact of the impact of high rents on attracting FDI and maintaining Dublin’s competitiveness as a location.

While he welcomed plans for the 73m "Exo" tower in the Point Village announced this week, Mr Waters said it will be at least 2018 before those offices come to the market.

The rental value of car parking spaces is also rising, with a city space now yielding an estimated €3,500 a year - up 17% in the past 12 months.  

Car parking spaces in the suburbs are estimated to be offering an annual rental yield in excess of €1,500 per space.