Dublin Office Market Activity Expected to Rise in H2 2021 - Construction Network Ireland - Construction Network Ireland

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Published in Commercial Property on 22/02/2021

Dublin Office Market Activity Expected to Rise in H2 2021

#savills

CNI Editor reports

Technology firms were, once again, the most active sector in Dublin’s office market in 2020, with Information and communications technology (ICT) accounting for the top ten deals year and 70% of take-up last year. Despite much talk about a migration from offices.

This is according to the latest Office Market in Minutes from Savills Ireland released today. The report found that although general employment has fallen, the share of office-based employment has stayed relatively steady, which bodes well for the future.

The failings of the final Brexit deal for financial services were also found to offer some opportunity to the Dublin office market, with firms that had, to date, only made a foothold presence in Dublin, now making moves to scale up their operations.

Speaking of the report John Ring, Director of Research at Savills Ireland said: “Despite the fall in employment, the office sector has proven more resilient to the Covid-19 shock than other sectors of the economy. Looking at the statistics from the Pandemic Unemployment Payment we can see that, despite accounting for more than one-quarter of Ireland’s jobs, the office-based sectors accounted for just 15% of those on the PUP.

The vaccination program too is representing light at the end of the tunnel albeit slower than the market would have wished for. If successful, the path back to the office in a significant way could be underway by the second half of the year.

Brexit Opportunity

Andrew Cunningham, Director of Offices at Savills Ireland said: “While we have always been conservative concerning the quantum of occupier relocations arising from Brexit, we are likely to see an increase transitions to Dublin and our agency have seen some examples. Many in coworking locations, such as WeWork – having awaited the result of the Brexit negotiations, are looking to increase their Dublin presence over the coming quarters. Some big names in the new generation of tech and fintech are also now landing”.

No evidence of a shift away from the CBD

Savills contend that there is no basis for a media narrative that has dominated this year, which is possible shift away from the Central Business District (CBD) towards suburban offices.

Mr Cunningham said there is no evidence of this, with the CBD’s 4Q share of take-up standing at 63% in Q4 2020. This demonstrates that real estate costs are not the driving metric for businesses and is evidence against the narrative that corporates will shed office space to save costs.

The Post-Covid Office Worker

Experts at Savills say they are confident that a shift to a hybrid model of working dynamics, where workers do some of their work from home, won’t necessarily translate into a significant office footprint reduction, once firms allow for surge capacity for the “popular days” and office space is adapted to facilitate lower density, collaborative workspaces in the office.

Outlook

The findings from the Savills report conclude that take-up of office space will be reduced in the first half of the year but emerging new demand and reserved tallies will start to rise (they already are) as many occupiers maintain their wait-and-see approach in the face of uncertainties around the final trajectory of the virus. Once vaccinations reach meaningful levels, Savills expect execution of deals into contracted take-up to scale up.

Mr Cunningham surmised: “If and when Covid ceases to be a relevant biohazard, many firms who would otherwise have leased space over the past 9 months may begin to look for suitable space and pent-up demand could release. As such we would expect to see take-up rise in the second half of the year after a lacklustre first half.

Flexibility will be a key factor for tenants in the short term. Smaller office sizes and fitted solutions will be more in demand in the short-term as is typical after a shock, but we expect larger longer-term requirements to resume as the year progresses. Such longer term requirements will likely focus on buildings with strong environmental credentials and maximised accessibility, on the presumption that public transport together with commutes on foot or by bicycle with their carbon reduction and health benefits will resume and increase ”.

Office Market Activity Highlights in 2020

  • Take-up in Q4 totalled 30,010 sq. m, bringing total take-up for full-year 2020 to 161,322 sq. m, just over half of the 302, 902 sq. m recorded in 2019.
  • Looking at the year as a whole, the overall numbers do not accurately demonstrate the true impact of Covid. Nine of the top ten deals in 2020 transacted in the first quarter of the year which also accounted for 63% of the take-up this year. When compared with the sum of Q2, Q3 and Q4 against the same quarters in the past five years, 2020 is 74% lower than the 5-year average from 2015 to 2019.
  • The largest deal in Q4 was Amazon’s letting of 6,938 sq. m at Burlington Plaza 2.
  • The DAA’s 4,100 sq. m leasing of Three Airport Central was the second largest deal of the quarter.
  • The HSE subleased 4,057 sq. m of space in HSQ for their track and trace program in a one-year deal with the option to be extended for a further 18 months.
  • Rabobank leased 2,183 sqm in the newly completed 76 Sir John Rogersons Quay on a long-term let.

Read the full report here: https://bit.ly/37z4Aio