Dublin Office Market Overview - Research, Q1 2021 Special Focus: Key Occupier Trends of the Future - Knight Frank
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Occupier Trends Investment Trends Market Outlook
Dublin Office
knightfrank.com/research
Market Overview
Research, Q1 2021
Special Focus: Key Occupier Trends of the Future2 3
DUBLIN OFFICE MARKET
ENERGY
OTHER
TMT
3.4% OVERVIEW Q1 2021
PROF SERVICES
FINANCE
GDP growth in 2020 – fastest growing
economy in Europe and the EU
4% growth expected in 2021 & 5% in
2022, with potential on the upside as the Ireland’s economy, while severely disrupted by Covid-19, was driven by the pharma
global economy recovers in line with the & TMT sectors, with exports reaching a record high. These sectors will support office
vaccine rollout demand as the economy re-opens in the second half of 2021.
PAGE 3
€391m 56%
ECONOMY or 5.4%, compared to 2019. The largest sector, they have been and will remain
increase in exports was in Medical and the drivers of office market demand.
The Irish economy was the only economy
Pharmaceutical products (+25%), which
in Europe to grow in 2020, against the The domestic side of the economy has
accounted for 39% of all exports. Ireland
Invested in Dublin office Value of Industry (including global and domestic backdrop of the suffered with retail, hotels and hospitality
assets in Q1, a strong Pharma) and TMT to the has become an important global exporter,
Covid-19 pandemic. GDP growth of 3.4% effectively closed (third lockdown in place
performance for an economy economy in 2020. with the US the largest export market in
last year reflects the unique structure and at the time of writing and since December
and sector in lockdown. US The strength of these 2020 (40%), while the UK accounted for
profile of Irish economic activity. It also 2020). Modified domestic demand, the
and German investors confirm sectors has supported 8% of export demand.
shows the cumulative positive impact of measure used to track the performance
their confidence in the Dublin the economy through the
Foreign Direct Investment (FDI) policies, Industry (including Pharma), along
5 KEY
market with two deals making pandemic, with exports from
25%
up 98% of investment Pharma up 25% in 2020
investment in Research & Development with TMT multi-nationals made the
PAGE 10 PAGE 3 and in education, that have been key strongest contribution to growth in 2020,
TA K E A W AY S
drivers of growth in recent decades. at 56% combined. These sectors employ
hundreds of thousands of people and have
All European and global economies have
expanded during the pandemic and along increase in export demand for
contracted severely and to differing levels
with financial services and the public medical and pharma products
as a result of the Covid-19 shock. EU GDP
contracted by an estimated 6.3% in 2020,
the euro area by 6.8% and the rest of world
Value of GDP by Sector, 2020
(excluding the EU) by 3.4%. A considerable
re-bound is expected globally and in DISTRIBUTION, TRANSPORT, INDUSTRY (INCL PHARMA) 40%
HOTELS & RESTAURANTS 9%
Ireland in 2022 and 2023. INFORMATION & TECH 16%
PROF, ADMIN & SUPPORT SERVICES 9%
PUBLIC ADMIN, EDUCATION & HEALTH 10%
uu
25% 27,000 Ireland was the only
European economy to
sq ft
grow in 2020
Of city centre office
uu
completions due in 2020 have
been delayed to 2021, due to
Office market take-up, while
enforced shutdowns. Delays While the Irish economy has also been
the lowest on record due to the
to the completions pipeline severely impacted, with the domestic
Covid-19 lockdown, does not reflect
are also becoming evident side of the economy in particular feeling
underlying demand. Almost 240,000
into 2022 and 2023
sq ft reserved in Q1 2021 the strain of numerous lockdowns, the
PAGE 8
PAGE 4 international side and the export sector
REAL ESTATE ACTIVITIES 6% AGRI, FORESTRY & FISHING 1%
have expanded. 2020 saw the value of FINANCIAL SERVICES 6% ARTS, ENT & OTHER SERVICES 1%
goods exported from Ireland increase to CONSTRUCTION 2%
€160.8bn, the highest level on record. Source: Knight Frank Research
This equates to an increase of €8.3bn4 5
of the domestic side of the economy, OCCUPIER TRENDS Almost 240,000 sq ft of space has been Vacancy if they proceed, will result in a further OUTLOOK
decreased by 5.4% in 2020. Job losses reserved in Q1, the largest being c. 40,000 Pressure on the vacancy rate has increase in the vacancy rate by the end
The office market has been in lockdown for The translation of demand into deals
have been the most severe across sq ft in the new Termini Building in increased in 2021, once again without of 2021.
the whole of Q1 2021 and as a result it comes closing is going to remain challenging
domestic sectors and it is not yet Dublin’s south suburban market. There surprise, given the low level of take-up.
as no surprise that office take-up activity for the rest of 2021, given the uncertain
clear how many of these will become is also just over 100,000 sq ft reserved in The vacancy rate now stands at 9.9%. No Rents
almost ground to a halt for the quarter. timing of an opening up of the economy
permanent losses until sectors such as Dublin 2 & 4 combined. new space has come to the market since
Limited deals closing has given little and an official return to offices. This in
retail and hospitality re-open. The result has been the lowest quarterly Q4 2020 as space under construction has
or no evidence on which to determine turn is dependent on the roll-out of the
take-up on record. not been able to complete.
On the positive side, household’s savings a change in prime rents. At the end of vaccine programme, which is set to gear
are at an all-time high which will have a uu There has been an increase in the grey 2020, prime rents had edged down to up in Q2 as more supply arrives.
Take-up
positive impact on consumer spending space available to the market in Q1. €57.50 per sq ft, and have stagnated in
A successful vaccine roll-out along
at the end of 2021 and into 2022. Take up of just under 27,000 sq ft in Q1, was Q1 has to be set against the 56,000 sq ft became available on the 5th Q1. Space coming to the grey market
with the re-opening of offices from
made up of just eight deals. The largest was background of a market & 6th floors of One Park Place, Dublin 2 may put some downward pressure on
Overall, the industry (including Q3 onwards, could allow for deals to
the letting of 10,000 sq ft in Scotch House, in lockdown, which while and 24,000 sq ft at Hanover Quay. There rents, but this is expected to be limited
pharma) and the information and proceed in the second half of the year,
Dublin 2 to MD7, a technology consultancy essential, has created an is c. another 250,000 sq ft of space that by tenants’ cost benefit analyses that
technology sectors have proved to be with take-up potentially reaching the
company. TMT and finance companies artificial situation, where will potentially come to the grey market will potentially show costs outweighing
the cornerstones of economic growth, same level as in 2020 and then to gather
made up 56% of the total space taken, in line decisions that would in the next six to nine months, which is benefits. Any downward pressure on
employment and of office demand. They pace in 2022.
with the trend in quarters with considerably otherwise be made, are being made available by the banking and rents will be balanced against expected
have provided considerable protection
more take-up activity. being delayed public
I N T E N D TO I N C R E A S E H O L D I N G S sector, with for e.g. the Central occupier preference for best in class Looking beyond that, the fundamentals
for the market and will drive demand as
Bank expected to release almost 80,000 space to maximise the safe return driving office demand in the Dublin
the economy re-opens. Economic growth Against the background of a market in
uu sqE ft
NO CHANG of space in Dublin Landings, to office based work. This in turn is market remain strong.
is expected to be close to 4% in 2021, lockdown, deals that close have to be taken
Dublin 1. The impact of these decisions, expected to put a floor on prime rents.
expanding further to 5% in 2022. as just one indicator of activity. I N T E N D TO D E C R E A S E H O L D I N G S
9.9%
TOP OFFICE LEASING TRANSACTIONS Dublin market vacancy rate
12%
PROPERTY TENANT SECTOR SIZE (SQ FT)
€57.50
10%
SCOTCH HOUSE, DUBLIN 2 MD7 TMT 10,021
Vacancy rate 8%
2ND FLOOR, MAPLE HOUSE, PAX ASSET 6%
FINANCE 3,714
SOUTH CO. DUBLIN MANAGEMENT
4% prime rents have stagnated
Take-up by sector SUITE 9 + 10, PLAZA 212,
Q1 2021 BLANCHARDSTOWN CORPORATE ALTERNUS ENERGY OTHER 3,187 (per sq ft)
PARK, DUBLIN 15 2%
TMT 38% UNIT A3, CENTREPOINT BUSINESS PROFESSIONAL 0%
PRIVATE INDIVIDUAL 3,096
PARK, DUBLIN 12 SERVICES
FINANCE 18%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021
Source: Knight Frank Research Source: Knight Frank Research
Office take-up Prime rental growth
sq ft (millions)
€80
€70
3.9M
3.6M €60
3.3M Forecast
range €50
2.8M
2.7M
2.4M €40
1.9M €30
1.5M
1.5M €20
OTHER 9%
1.0M
PROF SERVICES 17%
€10
ENERGY 18% €0
2013 2014 2015 2016 2017 2018 2019 2020 2021f
2013 2014 2015 2016 2017 2018 2019 2020 2021f
Source: Knight Frank Research Source: Knight Frank Research Source: Knight Frank Research6 7
L E T T I N G S , I NUV EROAS T M E N T S & D E V E L O P M E N T S I N Q 1 2 0 2 1
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The Anchorage
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Date: Q1 2021
Date: Q1 2021
RD
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Rent: €53.50 psf
INE
Rent: €62.50 psf
Take-up: 10,021 sq ft
O ’C O
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Take-up: 2,489 sq ft
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Sector: TMT
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S WOO
BY PAS Yield: N/A, majority vacant
OD GRAND
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CANAL Price: €95,000,000
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THOM T STR
AS S DUBLIN E ET
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(72% share)
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PATR I CK S TR E
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ST
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JA M
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STREET Whitaker Court
DAR
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D KI L M A I
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ROW
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BUILDINGS NA
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KEV OU LO
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UPP 16 Clanwilliam Terrace RE
ER ST STEPHEN’S ET
GREEN Date: Q1 2021 LO Project Tolka
WE
Rent: €38.00 psf R Date: Q1 2021 UE
T CUFFE ST BA TH AV EN
R EE Take-up: 1,561 sq ft Yield: Confidential
ST Tenant: Jensen Hughes Price: €290,000,000
RK
CO Sector: Professional Services
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Purchaser: Blackstone
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One Burlington Plaza
RO
Date
CH
(75% share)
AD
Type
AR
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Size: 161,238 sq ft
LE
Own
Newmount House
M
Spa
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NT
Date: Q1 2021
ST
Rent: €40.00 psf Two Burlington Plaza E
Take-up: 1,170 sq ft (75% share)
NU
Tenant: UMB
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Size: 75,089 sq ft
RA
Sector: Finance
NE
TIN
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LETTINGS Marine House
INVESTMENTS Date: Q1 2021
Rent: €42.00 psf
DEVELOPMENTS Take-up: 1,524sq ft
DART RAIL LINE Tenant: Phelan Energy
Sector: Energy
LUAS TRAM LINE
Note: Short-term license agreement
LUAS TRAM LINE8 9
SPECIAL FOCUS
OFFICE DEVELOPMENT
THE OCCUPIER MINDSET
The office development pipeline has
been significantly impacted by the
Covid-19 construction lockdowns,
the third of which is still in place.
Challenging working conditions
between lockdowns, for a combination
Covid-19 has ushered in a new debate about the future of work and the workplace. Much of
of reasons including health and safety,
that debate has been extreme and abstract. How are occupiers really thinking?
staffing and delays in materials, has
also slowed progress on many sites.
25% B etween December 2020 and February The form and function of office space But there is also an acknowledgement
Delays in completion dates have been
2021, Knight Frank surveyed will change – This notion of the office as that the form and function of the office
inevitable. Our research indicates that
almost 400 global corporate real estate a hub is further supported by expectations will evolve with greater cadence as the
25% of new space due to complete in
of city centre space delayed until 2021 professionals. Some of the findings* point around the configuration of the future pandemic recedes. Offices of the future
the Dublin city centre market in 2020
to the dynamics shaping post-pandemic office. More amenities, more collaborative will need to be more customer-centric,
has been delayed into 2021.
real estate and workplace strategies. space, less private space and a more fluid reduce environmental impact and utilise
There have been delays to space due to and up to nine months depending on interaction with the office incorporating technology and data to fully respond to
Real estate still matters – Despite recent
commence in 2021, with most projects the stage the project plans were at over hot-desking and desk-sharing are all the range of emerging agendas that will
debate about the future of the office, 90% of
delayed by a minimum of three months the last twelve months. anticipated outcomes over the medium shape business strategy.
our survey respondents see real estate as a
term. On a space per person basis we may
device that supports, facilitates or portrays
actually see a de-densification of office
business strategy. Key amongst these
occupancy but the key challenge will
strategic items are corporate brand and
be for occupiers to increase the level of
image, employee well-being and increasing
utilisation of the office space they hold.
90%
uu
cross business collaboration.
This will mean increasing the quality of the SAY REAL ESTATE IS KEY
Dublin’s office supply pipeline has been Covid-19 is a medium term influence but workplace experience and the greater use TO SUPPORTING
BUSINESS STRATEGY
significantly impacted by Covid-19 lockdowns cost consciousness is high – Despite the of technology and the data it produces to
all-consuming focus on Covid-19, almost curate that experience.
uu
half of our respondents believe that the
Greater connection required between
pandemic will have only a medium-term
net zero carbon commitments and
54%
OUTLOOK influence on their real estate strategies. ARE MORE COST
real estate – Four in ten of our survey CONSCIOUS
For a European city, in a performing The virus has however brought cost
respondents have a publicly stated net
New completions % TOP NEW BUILDINGS economy driven by technology consciousness further into the real estate
by location COMPLETED IN 2020 zero carbon emissions target, with three
companies, a delayed pipeline of new decision-making process. Fifty-four per
quarters of those having a target date of ‘by
space is not ideal. The challenges cent of respondents note that their cost
PROPERTY
SIZE,
SQ FT for the sector once activity opens up saving targets had increased since the onset
2030’. But our survey also shows a limited 50%
SUBURBS AND FRINGE 52%
connection between these broad corporate SAY THE PANDEMIC WILL
TERMINI, SANDYFORD, again, will include being able to safely of the pandemic, with more than one-third ONLY HAVE A MEDIUM
CITY CENTRE 48%
221,523 targets and the potentially positive TERM IMPACT ON REAL
DUBLIN 18
complete developments without now seeking to save more than 10% of their ESTATE STRATEGY
contribution that better occupying and
incurring additional costs and to meet annual real estate spend expenditure.
SORTING OFFICE, DUBLIN 2 203,700 utilising real estate can make towards their
the commitments made to occupiers
The flight to quality continues – achievement. Only 25% of respondents
AIRSIDE GREEN,
120,000
in the case of new buildings which are 46%
NORTH CO. DUBLIN At the same time, there is a clear believe there is a complete recognition of WILL OPT FOR HIGHER
already pre-let but have been delayed. QUALITY SPACE OVER
continuation of the flight to quality with the role of real estate in delivering against THE NEXT 3 YEARS
2 DUBLIN AIRPORT CENTRAL,
117,045
Offices under construction and not pre-
NORTH CO. DUBLIN 46% of all respondents anticipating an net zero carbon targets and for the bulk
let will face the challenge of competing
improvement in the quality of the space broader sustainability considerations are
BLOCK A, STEMPLE EXCHANGE, for the best covenants and rents against
BLANCHARDSTOWN 82,570
a backdrop of a market with pressure
they occupy over the next 3 years. Given seen as being of only moderate influence 40%
CORPORATE PARK, DUBLIN 15
cost consciousness, this infers a change in determining real estate strategy over the HAVE A PUBLICALLY
on the vacancy rate. The main positive STATED NET ZERO
ONE CENTRAL PLAZA, in workstyles with a greater use of more next 3 years. This does not sit well with the CARBON TARGET
74,000
DUBLIN 2 is an expected flight to quality for
remote workplace settings combined with a criticality of climate change.
both occupiers and investors, who are
high quality office fulfilling a hub function
expected to favour new, Grade A, ESG After the debate and practical challenges of
that supports interaction, collaboration,
Source: Knight Frank Research Source: Knight Frank Research compliant spaces – a trend that will 2020, our survey shows that occupiers still
education and socialisation.
become more prevalent going forward. see real business benefit from real estate. DR. LEE ELLIOTT, PARTNER, KNIGHT FRANK UK
*The full Report will be launched formally at the end of April, in the second edition of Knight Frank’s (Y)OUR SPACE.10 11
INVESTMENT MARKET AM Alpha acquired 76 St John Rogerson’s market is expected to gain momentum as
The investment market performed Quay, a new building which is partially lockdown lifts.
relatively well in Q1, reflecting longer term let. The strong price of €95m reflects the
Considerable interest is anticipated from
investor confidence in the Irish market. investors’ confidence in the ability to
international investors in, for example,
attract strong tenant interest and also the
Recognising that employment in the the sale later in the year of The Serpentine
preference for new, sustainable buildings.
sectors driving economic value have been Consortium’s interest in Facebook’s new
untouched by Covid-19, technology in As the timing of the return to the office European headquarters in Ballsbridge. The
particular, overseas investors purchased becomes clearer, with Amazon for four-block complex is expected to guide
€391m of Dublin office assets. The largest example leading the way in terms of close to €380 million. The consortium’s
transaction was the sale of The Project Tolka announcing its plans for a return to an holding is fully-let to Facebook and is part
Portfolio which included the purchase of “office-centric” culture from Q3 2021, of a larger campus of almost 900,000 sq ft
Colony Capital’s interest in a number of others are expected to follow. Hybrid which is in the process of being delivered
Dublin office buildings, including 28 & 29 models, which will incorporate working on the former AIB Bank Centre site. Given
Sir John Rogerson’s Quay, Whitaker Court from home, are potentially being its scale and location, it will test the depth
and No.’s 1 & 2 Burlington Plaza. embraced by other tech companies such of demand.
Microsoft, Facebook and Twitter, all
Blackstone was the purchaser of The Prime yields have tightened to 3.75% given
important tech occupiers and employers
Project Tolka Portfolio, with their the level of competitive demand in the
in the Dublin market.
investment of €290m seen as a vote of market for the best Dublin office assets.
confidence in the long term value of the All new office models will require space We expect this level will be tested later in
Dublin office market. German investor, and demand for office assets in the Dublin the year and into 2022.
98% Dublin office investment volumes (€ millions)
invested by international buyers 3.1M
Forecast
range
2.1M
1.9M
1.6M
1.4M
Profile of Investors 1.1M
1.3M
1.2M 1.2M
by location 0.8M
US
EUROPEAN
US 74% 2015 | £31BN
RISH 2013 2014 2015 2016 2017 2018 2019 2020 2021f
EUROPEAN 24% 2019 | £51BN
Source: Knight Frank Research
TOP 3 OFFICE INVESTMENT TRANSACTIONS
PROPERTY VENDOR BUYER PRICE
PROJECT TOLKA PORTFOLIO COLONY CAPITAL BLACKSTONE €290,000,000
76 SIR JOHN ROGERSON'S QUAY,
TIO AM ALPHA €95,000,000
DUBLIN 2
4075 KINGSWOOD ROAD, CITYWEST PRIVATE IRISH PRIVATE IRISH
IRISH 2% 2020 | £58BN €4,500,000
BUSINESS CAMPUS, DUBLIN 24 INVESTOR INVESTOR
2025 | £71BN
Source: Knight Frank Research Source: Knight Frank ResearchOccupier Trends Investment Trends Market Outlook Please get in touch with us
Dublin Office
knightfrank.com/research
Market Overview
Research Offices
Research, Q4 2020
Joan Henry, Chief Economist & Declan O’Reilly, Director
Head of Research declan.oreilly@ie.knightfrank.com
New Homes
Construction Survey
2021
joan.henry@ie.knightfrank.com
Paul Hanly, Director
New Homes Construction Dublin Office Market Robert O’Connor, Research Analyst paul.hanly@ie.knightfrank.com
Survey 2021 Overview Q4 2020
robert.oconnor@ie.knightfrank.com
Jim O’Reilly, Director
Capital Markets jim.oreilly@ie.knightfrank.com
Ireland Residential
Investment Snapshot 2020 Adrian Trueick, Director Daniel Shannon, Director
T
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adrian.trueick@ie.knightfrank.com daniel.shannon@ie.knightfrank.com
W
E
A
L
Peter Flanagan, Director Gavin Maguire, Associate Director
T
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R
E
P
peter.flanagan@ie.knightfrank.com gavin.maguire@ie.knightfrank.com
O
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t h e g l o b a l p e r s p e c t i v e o n p r i m e p ro p e rt y & i n v e st m e n t
K N I G H T F R A N K .C O M / W E A LT H R E P O RT 1 2021 — 15TH EDITION
WR2021_COVERARTWORK_03.02.2020_Agreed.indd 1 05/02/2021 14:08
Ross Fogarty, Director Mark Headon, Associate Director
Ireland Residential The Wealth Report
Investment Snapshot 2020 2021 ross.fogarty@ie.knightfrank.com mark.headon@ie.knightfrank.com
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