Growth in commercial property rents has slowed from 12.5% in 2006 to 5.1% in 2007.

According to the latest Lisney Rental Indices figures show retail was the best performing rental sector with growth at 8.8%

Office rents, which increased by 11% in 2006 had become stagnant in 2007.

The agency warned the quarterly data indicates that Dublin office rents have now shown virtually no growth since June of 2006.

Lisney's head of research, Dr John McCartney said: "We anticipate some slowdown in the demand for office space as corporate occupiers respond to a slowing global economy.

"With the financial services industry responsible for 45% of Dublin office take up last year, demand could be particularly sensitive to turbulence in global financial markets."

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Dr McCartney also pointed to very strong office building activity, which will add around 310,000 sq m of new office space this year, moderating rents.

"If the demand for office space moderates as we anticipate, rapid supply growth could cause vacancy rates to creep up. This would put downward pressure on rents."

However, Dr McCartney insisted that even if demand softens and supply increases, drops in headline rents may not be seen across Ireland.

"Firstly, there is an important regional dimension. Vacancy rates in Dublin city centre remain low. Therefore pressures are likely to be felt more in the west and north suburbs where vacancy levels are higher," he explained.

"Secondly, before any fall in headline rents comes through, I would expect to see an increase in the incentives landlords have traditionally offered tenants in the Dublin office market.

"These include rent-free periods, capital contributions, donations to fit out costs etc," he said.

On the other hand, industrial rates have increased reflecting limited availability of larger units, particularly on Dublin's southside.

(VB/JM)