The Dublin office leasing market has returned to record highs, with take up activity in 2017 reaching 287,250 sq m, on par with the pre-crisis peak of 2007. 2017 volumes were also 9% higher than 2016 and considerably ahead of the 10-year average, with demand from both domestic and international occupiers for office space remaining very robust.
The strength of occupier activity is reflective of a buoyant economy, continued expansion in the Irish labour market, combined with the uplift in office development activity to facilitate growth.
Focusing specifically on the Central Business District (CBD), a 16% uplift in take up was recorded in 2017, representing half of overall take up in Dublin. CBD take up was boosted by newly delivered stock to the market, which accounted for one-third of CBD activity in the year.
2017 activity was propelled by an uplift in very large lettings, in response to new development to a market starved of large Grade A floor plates for a number of years. Notably, five take up deals in the year were greater than 10,000 sq m in size, compared to zero in 2016.
The largest occupation in 2017 in Dublin was in the final quarter; Microsoft moved into their new 34,550 sq m office in Sandyford, Dublin 18, which they had designed and purpose-built in early 2015. Not surprisingly, the IT/Telecommunications sector, led by Microsoft, Facebook and LinkedIn, continues to be the prevailing tenant type in Dublin. This trend is expected to continue, with Google and Facebook anticipated to be key players in 2018.
A further five deals greater than 10,000 sq m in size were either signed or pre-let at year end. Notably, Indeed.com have pre-signed 100 and 300 Capital Dock, which combined measures 19,650 sq m, while the NTMA signed 13,850 sq m at the newly completed No.1 Dublin Landings, and are due to occupy in the first quarter of 2018.
Commenting on the market, Marian Finnegan, Chief Economist, Cushman & Wakefield said: “It was a particularly important year for the Dublin office market in terms of development. With approximately 180,600 sq m of new accommodation delivered in 2017, the highest since peak years, both occupiers and investors are being offered new and alternative options to satisfy requirements.”
The year ahead looks promising, with over 200,000 sq m due to be delivered throughout the year, 37% of which is already pre-let or reserved and some of which are Brexit-related. However, construction starts may begin to slow thereafter, as CBD sites become restricted to the IFSC - North Docks area and availability of finance impacts developers.
Positively, overall supply levels have begun to creep back up over the past twelve months, due to both the release of refurbishments to the market, and new stock being made available. The total quantity of available space in the market was 499,000 sq m at year end, representing a vacancy rate of 14.1%. Net of signed and reserved space, the vacancy rate stood at 8.7%, up from 8.1% in 2016.
Reflecting the particular strength of demand for accommodation in the prime CBD region, quoting rents in the CBD at year end stood at €619 per sq m per annum. Upward pressure is expected for the opening months of 2018, to €646 per sq m. Cushman & Wakefield forecasts that, in tandem with the controlled delivery of stock to meet demand, headline rents will remain at this level in the short-term.
Commenting on the market, Ronan Corbett, Head of Offices, Cushman & Wakefield noted; “Technology companies led demand in 2017 and this trend is set to continue into 2018. Serviced Office/Co-Working operators such as WeWork, Iconic and Regus will also account for a growing share of take up in the year ahead. We are also seeing a rise in expansions of professional service companies, in tandem with the growing economy.”
About Cushman & Wakefield
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Cushman & Wakefield is the commercial partner of the Sherry FitzGerald Group in Ireland.