202 new office buildings are planned for Dublin over the next 3 years, but only half are likely to be delivered. This is according to a new report from property advisors, Savills Ireland, revealing the pipeline of office development in Dublin.
Authored by Andrew Cunningham and Christopher Boyce, the ‘Skyline Survey’ estimates there is developer ambition for 12 million sq. ft. of new office accommodation by the end of 2021, with over 2.5m sq. ft. of existing buildings either being refurbished or completely redeveloped as part of the process. This would be enough office space to accommodate 120,000 workers.
However, the report reveals a measured ‘slippage rate’ in the delivery of planned buildings. For projects that are planned for delivery in 2 years and beyond, Savills analysis shows that over 50% of development has been deferred over time, and this is despite record recent take-up levels and demand for Dublin offices.
Today 4.5 million sq. ft. of office development across 46 schemes is under construction and due to the continuing strong demand for Dublin offices, 57% of space delivering this year has already been signed up by tenants in advance of completion. With demand for office space at a record high since the recession – currently at 4.1 million square feet (up from 3.5m sq. ft. pre the Brexit vote) – expectations are that the remainder will be snapped-up in a relatively short period of time.
Savills analysis shows demand is from across sectors and industries, but there is a clear focus on the prime locations. 89% of demand includes the core CBD area of Dublin 2 in the search criteria. Demand is being driven by tech companies, serviced office operators and financial services who are all vying for the best new buildings in the most sought after areas. With unemployment at a 10 year low of 5.9%, companies competing in the so-called ‘war for talent’ are using modern offices packed full of staff amenities as a carrot to attract the best young talent. Rents are a relatively small cost compared to wages, and the quality and location of the office space for workers is part of the offering to staff.
Gyms, kitchens, coffee bars, meditation and prayer facilities, bike racks, club style locker rooms, showers and drying rooms are all now standard features in the new wave of offices being built in the city. Wellness, Wired Score and LEED are now industry recognised measures which enable tenants to assess user wellbeing, quality of space, data connectivity and environmental sustainability in their prospective new buildings.
The Savills report, looking further down the pipeline, shows that 85 buildings (6.5 million sq. ft.) have received a grant of planning permission, but are not yet on site and it remains unclear when or indeed if these buildings will be built.
Andrew Cunningham, Head of Offices at Savills Ireland said tighter purse strings and greater regulations in the banks and finance houses mean conventional senior debt from domestic banks for speculative development remains scarce, an undoubted cause of the slippage in delivery of new stock.
“Development is being undertaken by those who are well funded, and while private equity has the largest share of the overall pipeline (51%), projects that are actually underway are more biased towards publicly quote prop-cos, REITS and funds with large balance sheets.”
Elsewhere in the report, Savills note the impact of ‘co-working’ on the office market. Take-up of space by serviced office providers – such as WeWork and Iconic – was less than 1% in 2015, however, in Q1 2018, this figure rose to 20%. According to Savills, this follows a trend emerging globally, and the growth is expected to continue with strong active demand in the market.
The full report is available to view here –‘Skyline Survey’