Annual take-up of office space in Dublin city centre has increased for a third consecutive year, climbing to a record high of 3.1m sq ft in 2018, 31 percent above 2017 and 41 percent above the five-year average, according to Lambert Smith Hampton’s Ireland Office Market Report 2019 which was published today.R
Activity was boosted by the single largest deal on record in Ireland. Testament to its long-term commitment in Ireland, Facebook leased 870,000 sq ft at the former AIB Bankcentre site in Ballsbridge. The site will be home to its new EMEA headquarters, with space to add an additional 5,000 staff when redeveloped.
Other major deals in 2018 include Google at Bolands Quay (200,000 sq ft), LinkedIn at Wilton Terrace (152,797 sq ft), Hubspot at 1SJRQ (113,034 sq ft) and IDA Ireland at Three Park Place (112,000 sq ft).
For the first time in recent years the volume of grade B/C take-up surpassed grade A, with grade A space accounting for only 37 percent of 2018’s total. This was, however, skewed by the Facebook deal as AIB Bankcentre is currently in grade B condition.
The technology, media and telecoms sector continues to dominate the occupier profile, accounting for a huge 58 percent of 2018 take-up. The serviced office sector was responsible for the second largest proportion of lettings (13 percent), boosted by WeWork’s lease of almost 354,000 sq ft across four city centre locations.
Healthy levels of construction and continued depth of demand have contributed to the steady increase in prime rents since 2014. Strong demand for high quality space saw a new headline rent of €65.00 per sq ft achieved at the end of 2018, a level confirmed by leases at Three Park Place and the Reflector.
Prime yields sharpened during 2018 to currently stand at 4.00 percent, evidenced by the €164m purchase at Dublin Landings by the Central Bank, reflecting 3.94 percent NIY.
The largest deal was the €176m purchase of the Eir HQ at Heuston South Quarter by the property arm of CK Hutchison Holdings, reflecting 5.70 percent NIY.
Joe O’Donoghue, director of office advisory at Lambert Smith Hampton, said:
“The Irish markets put in a record-breaking performance in 2018, exceeding the 5.5m sq ft mark for the first time, boosted by major deals and demonstrating clear resilience to the political turmoil. Occupiers are showing confidence in Ireland and benefitting from the wave of development in recent years.
“It was the so-called FAANGs (Facebook, Apple, Amazon, Netflix, Google) which grabbed the headlines in Dublin. Some of these tech giants demonstrated their commitment to Ireland and ambitions for growth in 2018. The revolution of serviced office operators and how occupiers consume office space also continued, with an eight-fold increase in two years. WeWork were the major driving force behind the meteoric rise in Dublin city centre during 2018, while Regus and Iconic have also been active. In Belfast there was growth in local and boutique operators.”
With over 3.5m sq ft of office space under construction in 2018, there was no shortage of cranes on the city centre skyline. Development eased down from its 2017 peak, with completions of just under 2m sq ft in 2018. Occupiers have been keen to secure the high quality space, with over half of 2018 construction already pre-let.
Over one million sq ft of new space is currently under construction and due for delivery in 2020, namely Charlemont Square (220,000 sq ft) and the Exo Building (170,000 sq ft), which will be Dublin’s tallest office block.
There is a considerable pipeline of planning consents in key locations, including large developments at Wilton Park (430,000 sq ft) and Spencer Place (380,000 sq ft). Development sites are, however, becoming increasingly limited, particularly within the docklands where one of the last remaining sites was sold in 2018 for €113m.
Supply levels remain relatively stable, standing at 2.6m sq ft at the end of 2018 and equivalent to 1.6 years supply. Supply is concentrated in the central business district (CBD; defined as D1, D2 and D4),
with only 13 percent of stock situated in the city centre outskirts.
Immediately available is the recently refurbished 5&6 Earlsfort Terrace (25,000 sq ft). Developments due for completion by year end include The Sorting Office (204,654 sq ft), 91-94 North Wall Quay (201,081 sq ft) and 76 Sir John Rogerson’s Quay (75,000 sq ft).
Mr O’Donaghue added: “Strong demand for city centre offices is expected to continue into 2019, particularly after March when more UK-based occupiers are expected to relocate to Dublin to ensure easy access to the EU. With much of the forthcoming new build developments pre-let, the serviced office sector is poised to take advantage of demand from new occupiers. While overall prime headline rents are expected to remain stable, there is the potential for rental growth in the docklands area where demand remains high and both sites and availability are becoming increasingly limited.”
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