Dublin, July 23rd, 2018 – Continued robust levels of office leasing activity sees the office sector remain a very dominate feature of the Irish investment market. According to the latest research by Cushman & Wakefield, the office asset class recorded an uplift in both the volume and value of deals taking place in H1 2018. Approximately €878.1m worth of office assets traded hands, accounting for 55% of total Irish investment turnover. This compares to €341.7m invested in offices in H1 2017.
The Dublin market absorbed 90% of this capital inflow. Within Dublin, the market saw a high level of investment both within the Central Business District (CBD) and in the wider county. Early recovery years saw office investment within Dublin polarised by the CBD, however, the past 18 months have witnessed a more dispersed pattern of investment. In H1 2018, turnover in Dublin was stronger outside the CBD, with transaction activity of approximately €404m recorded in the secondary and suburban markets.
The largest office transaction of note was The Beckett Building, Dublin 3. Located on East Wall, the office building measures over 17,000 sq m and was occupied by Facebook in 2017. A Korean bank, Kookmin Bank purchased the block for €101m. Interest in the office market and indeed the wider investment market continues to be derived from both domestic and overseas investors. Overseas investors are led by Europe, and in particular German and UK parties, while the emergence of Korean interest is also evident.
Turning to the Dublin office occupier market, approximately 103,000 sq m of space was taken up in the six months to June, across 115 deals. While H1 2018 take up is down on the comparable period last year, 2017 was an exceptional year, and the number of deals transacting remains very robust.
The market saw a very significant volume of signed and pre-let deals completing by the mid-point of 2018, totaling a combined 197,000 sq m. With these tenants due to move into space over the coming months, we anticipate a very healthy second half to 2018 for take up activity. This strong demand for office space continues to be supported by a fervent employment market and a positive economic story.
Demand remains concentrated in Dublin’s CBD. Approximately 63,750 sq m of space was taken up in the CBD in the six-month period, representing 62% of overall Dublin performance. The market remains dominated by the IT/Comm sector, while co-working/serviced office providers continue to grow their share of office take up. Notably, the largest occupation of the second quarter was that of WeWork moving into 5,050 sq m at Iveagh Court in Dublin 2.
Commenting on the market, Patrick Kiersey, Senior Surveyor, Cushman & Wakefield said; “Co-working/flexible workspace providers are continuing to take large amounts of space, accounting for an 8% share of take up in the first half of 2018, compared to 3% in the same period in 2017. These providers offer flexible fitted office space which tends to suit fast growing companies or tenants who cannot commit to long-term leases.”
The key aspect of the Dublin office market however continues to lie in development activity. Now standing at its highest level in the current cycle, 390,500 sq m of space was under construction at the end of June, with no letup in interest and enquiries for these buildings.
To date this year, approximately 60,450 sq m of office space has been delivered in Dublin, opening up new options for both entrants and expanding occupiers. A further 140,000 sq m of space is due to be delivered over the latter half of the year, of which a very positive 53% is already pre-let or reserved. Focusing again on the CBD, a remarkable 76% of the volume of space due to be delivered in the CBD this year has been pre-committed to key occupiers such as JP Morgan, the IDA, WeWork and Indeed.com.
Positive developments in construction activity is crucial to satisfying demand requirements, stabilising rental growth and maintaining Dublin’s attractiveness relative to comparable European cities. Prime Dublin office rents remained unchanged in quarter two, at €646 per sq m. While this is now ahead of previous peak levels, Cushman & Wakefield forecasts that rents will remain at this level out to 2020.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield is the commercial partner of the Sherry FitzGerald Group in Ireland.
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Communications Director, Cushman & Wakefield Ireland
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