136 new office buildings – totaling over 12 million square feet – are being planned for Dublin over the next five years, according to a new report by property consultants, Savills Ireland. This would be enough space to accommodate over 100,000 office employees.
While Savills acknowledge that not all planned developments will proceed, it says that even if half advance to completion, which is likely, Dublin will have enough office accommodation to reap any potential benefit of the UK’s decision to leave the EU.
Savills ‘Skyline Survey’ notes that 39 new office developments are currently under construction in Dublin – 13 of which have pre-commitment from a tenant to take space. Furthermore, 62 developments have received planning approval but are not yet on site, while 35 are in the planning stages.
The majority of office construction will take place in Dublin’s central business district (CBD) of Dublin 1, 2 and 4. Most of this development will be new builds, with refurbishments and extensions making up over 18% of the pipeline, and the replacement of existing buildings accounting for 39%.
Andrew Cunningham, Director of Offices at Savills Ireland commented:“Between 2010 and 2014, office construction in Dublin came to a complete halt for the first time since records began – something that was almost unique to the Dublin market and not experienced in any other western capital city. Take-up however was strong and as a result, the vacancy rate tightened quickly causing rents to rise sharply. This has made office development viable again.Although the numbers look quite high, the reality is that the current pipeline is constrained by available equity and debt funding – despite the demand/supply imbalance – and we are observing large scale postponement of schemes, especially those in need of pre-lets to commence on-site. As a result, there is little chance of us reaching a point of oversupply any time soon.”
Unlike the anecdotes being offered by the ‘Brexiteers’, Savills believe that Dublin will have enough office accommodation to reap any potential benefit of the UK’s decision to leave the EU. Emerging demand from London is likely to be spread across a number of cities in the EU who can collectively accommodate the movers.
Funding of Pipeline
The report also notes that lack of speculative funding is a recurring issue in the market, with the majority of development in the short-term being undertaken by REITs, funds or private equity backed by pre-funding. NAMA is also playing a significant part, providing full funding for 9% of all schemes and another 5% via joint ventures.
There are 39 office developments currently under construction in Dublin, with the majority (34) located in the CBD. Close to 42% of this space is pre-committed to an occupier and Savills expect this figure to rise further. One particular location undergoing concentrated office development is Molesworth St in Dublin’s historic inner core, where four office developments totaling 253,000 square feet, will transform the streetscape when complete next year,