This will go down as a year to forget for the Dublin office market.
The year started with a bang, with over one million square feet leased in the first quarter – the top five deals were all in excess of 100,000 square feet with Mastercard/ Slack/ Indeed/ Google and Dropbox all committing to large office footprints in the city. The subsequent take up figures of 75,000 square feet (Q2) and 235,000 square feet (Q3) show the impact the pandemic is having on the market.
The market remains effectively in pause mode as the majority of large multinationals (particularly tech sector) continue to adopt stringent work-from-home policies that are likely to remain in place until Q2 next year at the earliest.
As occupiers begin to make strategic real estate portfolio decisions and adopt to more remote working policies, Dublin is now seeing an acceleration in the supply of sub-lease/assignment space (‘grey space’). Approximately 25 per cent of the vacant stock now comprises grey space.
Interestingly, quoting rental levels have not changed significantly, but we do expect landlords to offer extended rent-free periods and more flexibility on lease lengths in order to compete with grey space options going into 2021.
The phased delivery of pipeline and relatively high percentage of pre-committed space should help alleviate concerns of another market crash. The Dublin market is heavily reliant on US tech, and global real decisions regarding future real estate strategies will ultimately determine what path the Dublin office market takes.
What is encouraging is that there is light at the end of the coronavirus tunnel and we believe the novelty of home working is wearing off for the majority of the office workforce.
In a very competitive recruitment environment, the option to offer staff a place to come to the office whenever they want to will be an important consideration when choosing where to work.
It is interesting to note that that two of Dublin’s largest occupiers (Indeed and Microsoft) have recently announced plans to offer staff permanent WFH options, but both state that they plan to keep their existing physical office footprint in Dublin. We anticipate that others will follow suit.
Paul Finucane is a director and head of Business Space at Colliers International