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Published in Commercial Property on 07/10/2020

Recovery in Office Leasing Activity in Q3

CNI reports

Property consultants CBRE Ireland have today released figures for the volume of office leasing activity recorded in Dublin in the first nine months of 2020. According to the property consultants, following one of the worst quarters on record in Q2, when less than 10,000 square metres of office leasing transactions signed in the Dublin market, there has been an increase in transactions in the last three-month period. However, despite a pick-up in activity quarter-on-quarter, take-up was considerably lower than what it normally would be in Q3 and full year figures for 2020 will be down on the record volumes recorded in the capital in recent years.

Dublin Office Take-Up 2016 – 2020 YTD

Source: CBRE Research

According to Alan Moran, Head of Investor Leasing at CBRE, “Office leasing volumes were up 125% quarter-on-quarter in the capital. In total, 22,194 square metres of office leasing activity was recorded in the Dublin market during Q3 2020, bringing total take-up in the first nine months of the year to a respectable 131,262m2. This is down 32% on the total volume of leasing activity in the same period last year, which is perhaps not surprising considering that many companies have deferred decision-making while they get to grips with Covid-19 restrictions and longer-term implications for their businesses’.

The property consultants say that it is encouraging that at the end of Q3 2020, there was almost 33,000 square metres of office accommodation reserved in the capital, which will translate into leasing activity over the coming quarters. The CBRE research shows that there were 29 office leasing transactions signed in Dublin in Q3 2020 compared with 37 in the same period last year. This brings the total number of office leasing deals completed in the first three quarters of this year to 75, compared to 136 in the same period last year. Significantly, most of the transactions signed in the last six-month period have been relatively small with no transactions extending to more than 4,645m2 (50,000 sq ft) signed in either Q2 or Q3, compared to 7 such transactions signed during the first three months of the year.

18 of the 29 office transactions signed in Dublin during Q3 were to Irish companies with 5 to US companies. However, in terms of the total volume of space leased, 47% of letting activity in Q3 emanated from US companies with 43% to Irish companies. 6 of the ten largest transactions signed in Q3 were relocations while the remaining 4 were expansions of existing occupiers.

Another decline was noted in terms of active requirements quarter-on-quarter with overall demand standing at approximately 237,500m2 at the end of Q3 – down 13% on the previous quarter and down from a record 430,000mat the beginning of the year. Most of this decline is a result of companies putting expansion and relocation plans on hold due to current uncertainty. The current level of demand is however still higher than the long-term average for the city, which is encouraging. 74% of requirements at the end of Q3 2020 were specifically focussed on Dublin city centre.

With regard to the debate about ‘the future of the office’, Marie Hunt, Executive Director at CBRE said “The consensus view at this juncture is that a blended approach is the most likely scenario longer term with workers opting to work remotely part of the time but still basing themselves for the most part in an office environment – albeit one that is configured differently to allow for appropriate social distancing”.

The overall rate of vacancy rose quarter-on-quarter from 6.65% at the end of Q2 to 8.64% at the end of Q3 2020, driven to some degree by The Sorting Office building moving from ‘reserved’ status back to ‘available’, some new buildings reaching practical completion during the quarter and companies putting surplus accommodation onto the market.  At the end of Q3, there were 35 office schemes under construction in Dublin city centre extending to more than 490,000m2 between them, of which 57% has already been pre-let.

Prime headline quoting rents in the city centre declined by 4% quarter-on-quarter to stand at €673 per square metre (€62.50 per sq. ft.) at the end of September.  

Lettings to computers and technology tenants accounted for 33% of take-up in Dublin in Q3. The public sector accounted for 26% of leasing activity in Dublin in the quarter while the manufacturing, industrial and energy sector accounted for a further 22% of take-up in the Irish capital during Q3.