The Dublin office market is on target for another record year for leasing activity. According to the latest research by Cushman & Wakefield, 79,750 sq m of office space was occupied in the capital in the third quarter of 2018. This is 18% higher than quarter three of 2017 and brings the 2018 year to date total to 182,750 sq m, across 179 deals.
Annual total take up now looks set to surpass the 250,000 sq m forecasted, and this would mark the fifth consecutive year of volumes exceeding the long-run annual average. This projection is supported by the large volume of deals signed and pre-let at end September, which will translate into very strong take up for year end.
Commenting on the market, Ronan Corbett, Head of Offices, Cushman & Wakefield: "2018 is shaping up to be another remarkable year in the Dublin office market. The level of take up represents a strong and growing market that looks like it will continue into 2019. Large technology companies dominate demand, however we are also seeing the welcomed re-emergence of indigenous occupiers".
Key movements in the market in quarter three included AIB occupying 12,000 sq m at Block H, Central Park in Leopardstown, which completed construction last year. In the CBD, 13-18 City Quay completed construction during the quarter with Grant Thornton moving into approximately 8,200 sq m, while Avolon took up 7,400 sq m at No.1 Ballsbridge Block 1.
The key deal signed in the quarter was Google entering a long-term lease to rent six floors at Grand Canal Quay office block in the south docklands, measuring over 5,200 sq m.
Tech companies continue to be the key drivers of growth in leasing activity and the best performers in Dublin, comprising 26% of take up in the year to date. Professional services companies followed, absorbing a further 25%. However, Dublin’s sectoral growth story continues to be in the co-working sector. Flexible office workplace take up has grown from a sub 1% share in the years 2014-2016, to 9% 2018 to date, and a more weighty 14% in the CBD. Specifically, WeWork has been one of the most high profile takers of space across Dublin over the past year, competing with tech giants Google, Amazon, Facebook and LinkedIn.
Subleases are also becoming a more prominent feature of the market. Increasingly, tenants are committing to a longer-term expansion plan by signing more space than immediately required, and subleasing the excess space in the short term until such time that they require it.
The CBD remains the most targeted area, accounting for 58% of YTD take up. This is not surprising given the persisting pace of development in the city centre. Notably 352,550 sq m of new office space is under construction in the CBD alone, the highest level on record, and over half of which is already pre-let or reserved.
That said, in absolute terms the secondary and suburban markets also remain very active. Outside of the CBD, a 27% uplift in take up was recorded annually to quarter three. In particular, office space in the south suburbs remains in high demand, resulting in prime headline rents in the south suburban area standing at €323 per sq m in quarter three.
Prime Dublin CBD office rents also remained stable in the quarter, at €646 per sq m, for large chunks of Grade A space. At this level, rents are ahead of the previous cycle peak, and over double that of the lowest point in 2011. Given the pace of development in the city centre, headline rents will remain at this level for the short-term.
Finally, the vacancy rate in Dublin, net of signed and reserved space, fell from 8.3% to 8% in the three-month period, while similarly the net vacancy rate in the CBD fell to 5.1%, from 5.8% in quarter two. Notably the availability of older, Grade B stock is slowly depleting as a result of the increase in refurbishments, whereas positively, the stock of much demanded, Grade A space, is rising.
About Cushman & Wakefield
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