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Published in Commercial Property on 08/07/2020

Record Low Volume of Office Leasing Activity in Q2

#CBRE

CNI Editor reports

On the day that Martin Shanahan, CEO of IDA Ireland pointed towards a possible 40% decline in FDI as a result of Covid-19, property consultants CBRE Ireland have today released figures for the volume of office leasing activity recorded in Dublin in the first half of 2020. According to the property consultants, following the second highest volume of Q1 take-up in a decade being signed in the Dublin market during the first quarter of 2020, Q2 2020 will go down as one of the worst quarters on record, with less than 10,000 square metres of office leasing transactions signed in the Dublin market during the three-month period.

In total, only 9,885 square metres of office leasing activity was recorded in Q2 according to CBRE, bringing total take-up in the first half of 2020 to 109,068m2 – down 28% on the same period last year.

Dublin Office Take-Up 2016 – 2020 H1

Source: CBRE Research

There were only 46 office leasing transactions signed in Dublin in the first half of 2020 compared with 99 in the same period last year. There were only 15 small transactions signed in Q2, one of which was a pre-letting transaction. 8 of the 15 office transactions signed in Dublin during Q2 were to Irish companies with 4 to US companies. Perhaps not surprisingly, another decline was noted in terms of active requirements quarter-on-quarter with overall demand standing at approximately 272,000m2 at the mid-year point, down from a record 430,000mat the beginning of 2020. Some of the decline is clearly as a result of requirements being fulfilled in the interim but for the most part, the decline was as a result of companies putting expansion and relocation plans on hold during the Covid-19 lockdown period.  72% of requirements at the end of Q2 2020 were specifically focussed on Dublin city centre.

The overall rate of vacancy rose quarter-on-quarter from 5.06% at the end of Q1 to 6.65% at the end of Q2 2020. At the end of Q2, there were 36 office schemes under construction in Dublin city centre extending to more than 500,000m2 between them, of which 52% has already been pre-let. Interestingly, approximately 70% of the new office stock due for completion in Dublin in 2021 has already been pre-let, which demonstrates the extent to which the supply pipeline is controlled in this cycle.

 Lettings to computers and technology tenants accounted for a mere 8% of take-up in Dublin in Q2. The financial services sector accounted for 14% of leasing activity in Dublin in the quarter while the business services sector accounted for a further 12% of take-up in Q2. Meanwhile, manufacturing, industrial and energy tenants accounted for 35% of take-up in Q2 with the public sector accounting for 23%. All of the 10 largest lettings completed in Dublin during Q2 2020, 2 were expansions, 3 were new entrants while 5 comprised relocations.

According to Marie Hunt, Executive Director at CBRE, “Q2 saw only a very small number of office leasing transactions completing in the Dublin market, with most activity stalled in light of Covid-19. Encouragingly, following a very low volume of activity being recorded in Q2, there are definite signs of increased activity in the Dublin office property market in recent weeks. A number of office requirements and transactions that were on hold over the last couple of months are now reigniting; enquiries have increased, and socially distanced inspections of available buildings have started to take place again. There are also a number of deals in legals which bodes well for a more normalised level of activity in this sector in Q3 following a very disappointing albeit not unexpected Q2”.