Dublin’s office market rebounds

Dublin 2 leads Dublin’s office market rebound as the economy takes off.

Dublin’s office market rebounds: All expectations about the pace of recovery in the Irish economy have been exceeded, with GDP growth now expected to be over 15% for the year as whole. Domestic activity has taken off and is expected to be at pre-pandemic levels by the end of 2021. Coupled with the ongoing strength of multi-national sector, the value of the economy is set to reach the highest level on record in 2021.

With these levels of growth will come an increase in employment, with the Central Bank indicating that it expects 160,000 jobs to be created by 2023. While employment growth has been slower to recover in the sectors which have been worse affected by Covid-19, such as hospitality and retail, it has been stronger than pre-pandemic levels in the high value adding sectors of ICT and industry (including pharma), which remain the two highest value adding sectors of the overall economy. Job creation in the professional services sector has also already gathered pace in 2021.

The multi-national sector, largely unaffected by Covid-19, is experiencing a stronger than expected increase in overall demand and export demand in particular. The pace of recovery in the EU, US, UK and Ireland’s other trading partners has and will continue to add further momentum to export demand. Irish export growth is set to reach double digits in 2021 and will remain a driving force into 2022 and 2023.

Against this backdrop, it comes as no surprise that office letting activity experienced a considerable boost in Q3, with 425,000 sq ft of space taken, 60% more than in Q2. As the Dublin office market rebounds, Dublin 2, the traditional core of the office market is set to benefit the most with close to 50% of forecast total take-up for 2021 to be in Dublin 2. Buildings in the area have on average, accounted for just over a third (35%) of total annual space let per in the overall market over the last ten years.

Ten large deals totalled just under 2m sq ft of space taken in Dublin 2 over the same time period. This total will reach over 2.5m sq ft, if two large deals already agreed close by the end of the year. Between them, KPMG’s agreement to take Harcourt Square for its new headquarters and TikTok’s agreement to occupy The Sorting Office equate to 500,000 sq ft.

73% of the space completed in the office market in Q3 is in Dublin 2, with the completion of 135,000 sq ft at Fitzwilliam 28, which is pre-let to Slack, the largest building to complete in the market this quarter. An additional 145,000 sq ft at Fitzwilliam 27, is due to complete by year end.

TMT and Professional services companies took 51% of the total space let in Q3, once again in line with the longer term trend in the market.

Such recovery is not without its challenges, with inflationary pressures the most immediate concern. Both labour shortages (leading to higher wages) and price increases on materials are having an impact on the construction sector and on overall commercial building costs, which is expected to feed into upward pressure on rental levels in the office market in 2022 and 2023. Overall however, economic conditions are very favourable for the office sector. The removal of the requirement to work from home from 22nd October, will allow companies to implement their hybrid or preferred working models. Combined with considerable job creation across key sectors which are office based, including ICT, professional services and the public sector, companies will be better able to assess their future office space requirements and seek expanded and new space that