Dublin Office market take up for 2022 exceeded the ten year moving average figure and surpassed 2,600,000 sq.ft. by year end. This figure was boosted by a busy Q4 with over 804,000 sq.ft. transacting in the final quarter of the year. This was largely attributable to the two largest transactions of the year, Citigroup’s acquisition of 300,000 sq.ft. at Waterfront South Central and SMBC Aviation Capital’s leasing of 135,000 sq.ft. at Fitzwilliam 28.

Whilst not back to pre-covid levels, take up has increased by 53% on 2021 figures and we are seeing further stability in the market with an upsurge in activity from the Professional services and financial sectors.

The Bannon Dublin Office Market report is available now. Take up for the third quarter reached 819,000 sq.ft. representing a 60% increase on Q2 and a 77% increase in the same period last year. Lease flexibility continues to be sought in the short term as companies continue to assess their office requirements as remote and hybrid models are fully determined.

We are seeing an increase in activity from the financial and professional services sectors, many of whom are seeking to satisfy their ESG policies in terms of their real estate decisions.

To view the full report, please click here.

There is a puzzle which involves moving the one empty space around a collection of tiles to make the correct image and it comes to mind when looking at the near-term future of the Dublin Office market.

The headline stats on the office market will tell you that there is 5.6m sq.ft. under construction but that 2.2m of it is pre-let. What these stats hide is that some of that pre-let space is actually available. Take 2 & 3 Wilton Place which are currently being built by IPUT for LinkedIn who have advised the market that they no longer want to occupy these buildings. IPUT’s investment is secure as the buildings are effectively let to a Microsoft business who are legally committed but from the market perspective 330,000 sq.ft. has just moved from the pre-let column to the available to let column and it’s not just buildings that are under construction. As agents on the redevelopment of the ESB headquarters we pre-let 28 Fitzwilliam Place to the tech company Slack subsequently selling the investment to the large European Investors Amundi. Slack were subsequently bought by Salesforce and 28 Fitzwilliam although fully complete since 2021 has never been occupied. To these examples can be added the buildings in the Facebook / Meta HQ in Ballsbridge which they have decided not to occupy although it is not clear that they will be bringing these to the leasing market or just mothball them for the time being.

What this adds up to is a much greater availability of brand-new top-grade office stock than the headline stats would suggest. We have no doubt that all this brand new ESG compliant stock will be occupied. They are good quality buildings in good locations that comply with the sustainability needs of large corporate occupiers. What it will do however is speed up the movement of the tiles around the board. It accelerates the ability of large corporate occupiers currently residing in non ESG compliant buildings to move to the buildings they need. When the image is complete the empty tiles will correspond to the older non ESG compliant buildings which will need to be upgraded, converted to alternative uses or generate a much lower rent than they have achieved heretofore.

At Bannon the Office & Consultancy teams are actively working with clients to solve the more complex problem, how to generate the best return from well located office stock that fails the sustainability test.

Author:                 Neil Bannon, Executive Chairman, Bannon 

A cursory look at both the third quarter and year-to-date property investment volume data would indicate that it’s a case of “steady as she goes” in the market but as always, the proverbial devil is in the detail. When you pull back the curtain on the statistics, the current institutional investment mantra of “beds, sheds and meds” is reflected in the true underlying trends.

At first glance, investment volumes for the third quarter show that offices hold the lead at 37.7 per cent closely followed by residential at 36 per cent. Year to date shows an even stronger position for offices at 43.5 per cent and residential at 29.9 per cent. However, two key transactions shroud a huge shift in the market and highlight the importance of both the residential sector and the movement in non-office investments.

If we exclude the €1.089 billion Hibernia Reit (Hibernia Real Estate Group) transaction from the second quarter (which arguably should not have been included as it was a corporate acquisition) and the one-off €500 million Salesforce headquarter deal from the third quarter, the lay of the land changes dramatically. The result is that the residential sector exceeds 50 per cent of third-quarter volumes and 44.4 per cent of the year-to-date volumes. Conversely, the office sector falls to a mere 17.7 per cent of the quarter and 17.6 per cent for the year-to-date.

This is a dramatic transition for the offices sector, which accounted for 39 per cent of market transactions in 2020 and 28 per cent in 2021. A number of factors are likely contributing to this shift. Among them is the depleting availability of developer-led schemes for trade, concern attaching to the occupational impact of the working-from-home (WFH) phenomenon, and the unknown impact of required ESG retrofitting to standing stock.

As a consequence of the decline in the office sector’s relative importance we are seeing a number of alternative sectors come to the fore. The industrial sector has seen the reverse trend as the desire for sheds from institutions is unabated and the supply side is relatively elastic. It has grown from a mere 4 per cent in 2019 and 8.8 per cent in 2020 to 13.1 per cent currently, almost on a par with office. Similarly, the healthcare sector, from near obscurity, comes to represent almost 8 per cent of investment volumes.

When you add all this up, excluding the Hibernia and Salesforce deals, “beds, sheds and meds” made up over 65 per cent of investment-transaction volume in the year to date. When you consider that sheds and medss collectively amounted to mere rounding errors in the investment statistics 10 years ago, it demonstrates just how much the real-estate landscape has shifted and reinforces the sheer naivety of assuming that the market today is a clear indicator of future trends

The increased availability of so-called “grey space” and sublet opportunities, eg LinkedIn in Wilton Place, may further reduce speculative office development and consequent supply. The roll-out of primary healthcare centres across the country will support continued growth in investment the healthcare sector. These trends point to the future of the investment market and are the current focus of our research and consultancy team.

Article by The Irish Times