DUBLIN OFFICE MARKET OVERVIEW 58,650 sq ms3-eu-west-1.amazonaws.com/mediamaster-s3eu/0/7/... ·...

Cushman & Wakefield | Dublin Office Market, Q1 2019 1

Key Statistics Q1 2019

Dublin CBD (Central Business District)

Take Up 58,650 sq m 42,800 sq m

Average Sized Deal 1,450 sq m 2,150 sq m

Current Stock 3.72m sq m 1.99m sq m

Availability 429,200 sq m 203,150 sq m

Vacancy Rate 11.5% (Net VR 6.5%) 10.2% (Net VR 5.4%)

Under Construction 470,350 sq m 352,600 sq m

Pre-let & Reserved 57% 64%

Source: Cushman & Wakefield Research

DUBLIN OFFICE MARKETQ1 2019

OVERVIEWOccupier activity continues to perform strongly in the Dublin office market. Approximately 58,650 sq m of space was taken up in the opening quarter, with the CBD driving take up.

A high volume of space was also pre-committed, indicating robust activity levels should persist as the year progresses.

Demand remains driven by the greatly expanding tech sector, professional services and finance, while also the newest sector, co-working, is featuring highly. Featuring highly. Examples of such tenants who occupied or committed to space in the opening quarter include; WeWork, Google, Salesforce and Facebook.

Development activity reached a new record in the opening quarter. A total of 470,350 sq m was under construction at the end of March, considerably above the long run average of just over 200,000 sq m. Three quarters of this space was located within the CBD, where an impressive 51% was pre-let and a further 13% was reserved.

Despite development activity continuing at pace, availability in the Dublin office market declined marginally in annual terms, resulting in a net vacancy rate of 6.5%. The consistently low net vacancy rates provide the underlying backdrop for anticipated further inflation in prime office rents. Having increased by 4.2% in 2018, prime rents remained unchanged in the opening quarter of the year at €646 per sq m. Forecasts by Cushman & Wakefield suggest a rise to €673 per sq m by year end.

A TOTAL OF 58,650 SQ M WAS TAKEN UP IN THE DUBLIN OFFICE MARKET IN THE OPENING QUARTER.

DEVELOPMENT ACTIVITY REACHED A NEW RECORD IN QUARTER ONE, WITH 470,350 SQ M UNDER CONSTRUCTION.

58,650 sq m

470,350 sq m


Dublin Quarterly Take Up, Q1 2011 – Q1 2019

0

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40,000

60,000

80,000

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120,000 Sq M

LR Av. 46,050 sq m

Q1 201958,650 sq m

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CBD Suburbs/Secondary Dublin LR Qtr Average Take Up


Reflecting the continued robust growth in Ireland’s employment numbers, occupier activity in the Dublin office market performed strongly in the first quarter of 2019. A total of 58,650 sq m of space was taken up in the three-month period, once again above the long run quarterly average of approximately 46,050 sq m.

Further emphasising the underlying strength of occupier demand, the end of the quarter returned a high volume of signed and pre-let space, for both standing stock and development activity. Of the available standing stock, approximately 148,350 sq m of space was pre-let, with a further 40,250 sq m reserved. Furthermore, a total of 265,850 sq m of space under construction was either pre-let or reserved.

Spanning across 40 transactions, the average-sized deal in the first quarter was 1,450 sq m. This compares to an average of 1,121 sq m in 2018 and 1,043 sq m in 2017. The growing level is reflective of occupiers committing to larger floor plates. In some cases, tenants leasing large amounts of space are subletting a proportion of this for the short-term, with the intention of occupying it in full further down the line.

The largest occupation of the quarter was Indeed.com’s take up of the entire 10,425 sq m of space at 100 Capital Dock, Dublin 2. The Grade A1 office space on Sir John

DUBLIN OFFICE MARKETDEMAND


Dublin Office Market, Pre-Let/Reserved Space, Q1 2012 – Q1 2019

0

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150,000

100,000

50,000

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500,000 Sq M

Construction Activityre-emerged in Q1 2013

265,850 sq m

188,600 sq m

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20

12

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13

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14

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15

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16

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Availability (Pre-let/Reserved) Under Construction (Pre-Let/Reserved)

Emphasising the underlying strength of occupier demand, a total of 188,600 sq m of standing stock was pre-let/reserved in Q1.

188,600 sq m


Rogersons Quay completed construction at the end of 2018. The employment-related search engine also occupied 300 Capital Dock, measuring 9,200 sq m. Another occupation of note in the three-month period was Wework’s take up of Charlemount Exchange, Dublin 2, which following a total refurbishment and an addition of two floors measured 8,300 sq m.

Outside of take up deals, the opening three months of 2019 reveals a very strong quarter for signed, reserved and pre-let deals. American software company, Salesforce, pre-let the entire 39,950 sq m under construction at Spencer Dock. Elsewhere, social media giant, Facebook signed 16,200 sq m at the recently refurbished Nova Atria South, Sandyford, Dublin 18. This follows Facebook’s pre-let of Fiobanchi Square and the Bankcentre campus in Ballsbridge, Dublin 4, while also marks its first move out of the city centre. Lastly, the OPW have pre-let a further 15,100 sq m of space at The Distillers Building, Smithfield, Dublin 7. The building is due for completion in 2020.

Focussing on the CBD, occupation of new office stock drove the concentration of leasing activity in the prime CBD area to 73%. This translates to approximately 42,800 sq m of space. The proportion of total take up located in the CBD reached an annual peak of 64% in 2018. This compares to the long-run average of 49%.

Given the strong start to the year, and the volume of space that remains under construction in the CBD, this trend of high absorption is expected to continue.


Dublin Vs. CBD Office Market Take Up (Sq M)

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CBD = 73% ofQ1 Dublin TU

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9

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Overall Dublin O�ce TU CBD O�ce TU LR Average CBD TU LR Average Dublin TU

The CBD accounted for 73% of office take up in Dublin.

73%


A sector analysis of take up in the opening quarter reveals the tech sector continues to be a driver of demand. Driven by Indeed.com’s presence in the Capital Dock deals, tech accounted for 47% of all take up.

This is marginally higher when looking solely at the CBD, rising to 49%. Co-working follows, absorbing 14% of overall Dublin take up. However, it is worth noting that this is solely based on WeWork at Charlemont exchange, and perhaps therefore presents a distorted picture of the largest sectors.

Healthy demand also remains evident from professional services and finance occupiers, which along with tech are the most active players in the market in terms of the number of deals. This trend is very apparent when looking at take up on a year on year basis.

Also of note is the average-sized deal in each sector. Rather interestingly, serviced offices hold the largest average over the past 12 months, while finance and state occupiers also have averages above the overall market average. The overall market average for the 12-month period is 1,225 sq m.

DUBLIN OFFICE MARKETSECTOR TRENDS


YOY Take Up by Sector and Average-Sized Deal, Q1 2019

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0.0

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6,000YOY Take Up, Sq M Co-WorkingAv. Deal5,250 sq m

1,750 sq m

1,800 sq m

Average Sized Deal, Sq M

Tec

h

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YOY Take Up Average-Sized Deal

The average-sized deal in the co-working sector over the past 12 months is 5,250 sq m.

5,250 sq m


CBD Vacancy Rates by Grade, Q1 2019

Grade A Grade B Total

VR 13.1% 4.3% 10.2%

Net VR 6.5% 3.3% 5.4%


CBD Submarket Net Vacancy Rates, Q1 2019

Ballsbridge Fringe IFSC – North Docks South Docks Traditional

Core

NET VR 8.1% 3.6% 2.1% 7.3% 5.4%

Grade A Net VR 10.4% 3.1% 2.1% 7.0% 8.3%


Overall, availability in the Dublin office market declined in the opening months of 2019, standing at 429,200 sq m at the end of March 2019. This reflects an annual marginal decline of 2.2% and corresponds to a vacancy rate of 11.5%.

Despite the annual decline in the entire market, availability in the CBD has increased over the same period, rising 6.3%. Unsurprisingly this is driven by the intensive development activity in the area. However, it is worth noting that although an approximate 145,550 sq m was completed and delivered to the CBD over the past 12 months, the annual increase in availability translates to just under 13,000 sq m. This confirms the high level of absorption for new stock delivered.

The largest proportion of available stock is located in the CBD, 47%, followed by the suburban markets, at 38% and the remainder in secondary locations.

Delving further into market availability, a significant portion of this was marked as either pre-let or reserved at the end of the quarter, 44%, producing a net availability of 240,600 sq m. In fact, pre-let standing stock reached a new record high in the current cycle. Excluding the pre-committed space effectively halves the market’s vacancy rate, with net vacancy recording at 6.5%. The corresponding net vacancy rate in the CBD stood at 5.4%.

DUBLIN OFFICE MARKETAVAILABILITY

Given the large volume of pre-committed space, the CBD’s net vacancy rate remains low at 5.4%.

5.4%


Dublin Availability Vs. Net Availability, Q1 2011 – Q1 2019

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900,000 Sq M Peak AvailabilityQ1 2011

806,700 sq m

429,200 sq m

240,600 sq m

Growing divergencebetween Availability &

Net Availability

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Availability Net Availability



CBD Construction Activity by Sub-Market, Q4 2013 – Q1 2019

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Ballsbridge Fringe IFSC/North docks South Docks South Docks


Dublin CBD Office Development Activity, 2007 – 2021f (Sq M)

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76%

46% 94%

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Completions Under Construction - Pre-let/Reserved Under Construction - Available

LR Avg. CBD Take Up Forecast Avg. Annual CBD Take up

A pivotal feature of the office market at present is the intensity of development activity. The volume of space under construction in the Dublin office market reached a further record high at the end of the first quarter. Approximately 470,350 sq m of space was under construction across 45 buildings.

With demand for premium space remaining strong, an impressive 57% of this space was either pre-let or reserved.

The vast majority of development activity continues to be within the CBD. The CBD accounts for 352,600 sq m of construction across its five sub-markets. Furthermore, just under 64% of this is pre-committed. Outside of the CBD, the South Suburbs also saw a strong level of development activity with a total of 63,250 sq m on site.

Within the CBD, the IFSC/North Docks has over taken the South Docks has the most active area. The volume of space on site in the South Docks declined significantly after the completion of the two Capital Dock buildings at Sir John Rogerson’s Quay, The Reflector at Hanover Quay and Waterways House at Grand Canal Quay in the last quarter of 2018.

This is a much-welcomed development for the IFSC/North Docks market, which currently holds the lowest net vacancy rate of all the CBD sub-markets, just 2.1%.

DUBLIN OFFICE MARKETDEVELOPMENT ACTIVITY

The above graph also shows a large increase in construction activity in Ballsbridge since Q4 2018. This is of course led by work under way at the Bank Centre Campus and Fiobanchi Square, extending to approximately 80,250 sq m, for social media giant, Facebook.

Looking specifically at new supply to be delivered to the market in the coming quarters, a total of 89,100 sq m of space currently under construction is set to be completed in 2019 in Dublin. Within the CBD, 43,250 sq m is due to complete, with 76% of this pre-committed. This high proportion of pre-lets solidifies the unwaning demand from occupiers, their willingness to pre-commit in order to acquire space, and their commitment to Ireland.


Positive developments in construction activity has led to a slowdown in the pace of rental inflation in the prime Dublin office market compared to levels earlier in the cycle. Prime rents at the end of quarter one sat at €646 per sq m, unchanged from year end.

The IFSC/North Docks continues to display a €50 differential in prime rents compared to the core CBD, standing at €595 per sq m at the end of quarter one.

Strong underlying demand, most evident by the volume of pre-committed standing stock and development space in Q1, is placing further upward pressure on rental levels. Forecasts by Cushman & Wakefield see prime rents moving to €673 per sq m by year end. Modest, incremental rental inflation is anticipated to continue for the short term, as completions and construction starts in prime locations are expected to slow.

DUBLIN OFFICE MARKETRENTAL LEVELS


Dublin Prime Headline Rent (€ per sq M), 2001 – 2023f

0

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€100

€300

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€500

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€800 € per Sq M

€619

€312

2019F€673

2023F€710

+5.5%forecast

2019-2023

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3 20

01

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3 20

02

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3 20

03

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3 20

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05

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08

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f20

21f

2023

f

“�Further�growth�in�employment�numbers�in�Ireland�continues�to�stimulate�demand�for�office�space. In the opening quarter of 2019, rapid expansion in the tech sector, alongside activity from�co-working�workspace�providers,�professional�services�and�finance�were�all�key�drivers of take up, accounting for a combined 77% of space occupied.”

RONAN CORBETT, HEAD OF OFFICES, CUSHMAN & WAKEFIELD IRELAND.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers

and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and

70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital

markets, valuation and other services. To learn more, visit www.cushmanwakefield.ie or follow @CushWakeIRL on Twitter.

To learn more, visit cushmanwakefield.ie or follow @CushWakeIRL on Twitter.

© 2019

CONFIDENTIALITY CLAUSE

This information is to be regarded as confidential to the party to whom it is addressed and is intended for the use of that party only.

Consequently and in accordance with current practice, no responsibility is accepted to any third party in respect of the whole or any part of

its contents. Before any part of it is reproduced, or referred to, in any document, circular or statement, our written approval as to the form

and context of such publication must be obtained.

CONTACT DETAILS

AUTHORS

Marian Finnegan

Chief Economist, Director Research

+353 (0) 1 237 6341 [email protected]

Ronan Corbett

Head of Offices, Director

+353 (0) 1 639 9641 [email protected]

Kate English

Economist, Researcher

+353 (0) 1 237 6383 [email protected]

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