Dublin Office Market Overview - Research, Q4 2020 Occupier Trends Investment Trends - Knight Frank
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Occupier Trends Investment Trends Market Outlook
Dublin Office
knightfrank.com/research
Market Overview
Research, Q4 2020
DUBLIN OFFICE MARKET OVERVIEW Q4 2020 DUBLIN OFFICE MARKET OVERVIEW Q4 2020
Q4 OVERVIEW activity until the second half of 2021. This
will be led by TMT occupiers. Having
INVESTMENT MARKET
Project Opera in 2013 prior to embarking
on a substantial redevelopment of
Summary
performed strongly during the pandemic €1.2 billion worth of office assets transacted the building. It was anticipated at the
The office market was severely disrupted by Covid-19 in 2020, but 2021 – for example Google, Microsoft, Amazon in 2020 in what was a robust performance beginning of last year that prime office
1. Ireland’s economy showed promises to be a stronger year with the vaccine rollout now underway and Facebook have witnessed their market considering the disruption caused by yields in Dublin would move closer to
remarkable strength in 2020 capitalisations rise from a combined $3.6 the Covid-19 pandemic, with many German and French rates in 2020, with
with GDP growth projected to be trillion to $5.3 trillion – these companies international investors unable to inspect the potential for a 25-50 basis point shift.
between 3.5%-4.0%. The recovery ECONOMY activity was negatively impacted for the will be poised to expand their workforces opportunities due to travel restrictions. However, Covid-19 prevented this from
is expected to gain momentum remainder of the year with just 665,000 and office requirements once the pandemic Although €3.1 billion was invested in 2019, happening with prime yields holding
Resilience, set against a strong starting
throughout 2021 with the vaccine sq ft transacting. However, there were subsides with Dublin well positioned this was an exceptional year owing to the at 4.00%, while values for secondary
point, is expected to result in a 3.5%-4.0%
rollout now underway still some notable deals during that time to benefit given how critical the city is sale of the Green REIT portfolio. properties fell as investors took account
increase in GDP in 2020. Although the
including Amazon’s letting of 75,700 sq ft to the strategic business activities of of the increased letting risks.
2. 1.5 million sq ft of office space Covid-19 pandemic caused a significant European Buyers were particularly active
at 2 Burlington Plaza and Microsoft’s taking these companies. Finally, Covid-19 has
transacted in 2020 – 55% below contraction in domestic industries accounting for 78% of the investment Last December, the ECB increased the
of 43,900 sq ft at No. 3 Dublin Landings. ensured that speculative development is
the level that was let in 2019 – as such as retail and hospitality, growth spend. The largest deal of 2020 was the size of its pandemic emergency purchase
In total, TMT comprised 66% of take-up likely to be subdued with only projects
businesses reassessed their was driven by the internationally purchase of Bishop’s Square by GLL Real programme from €1.35 trillion to €1.85
followed by the State and Finance with 10% that have a lease agreement or that were
relocation and expansion plans due traded pharmaceutical and ICT sectors Estate Partners from Hines for €183.0 trillion and announced that it would
to Covid-19 and 8% respectively. The vacancy rate rose under construction prior to the pandemic
which recorded impressive growth in million which is occupied predominantly continue to conduct asset purchases
to 9.5%, up from 6.9% a year earlier – driven proceeding. This tightening of supply,
employment and output. The IDA’s by the OPW. Elsewhere, Amundi Real until at least March 2022. This will
3. The vacancy rate rose to 9.5%, by the delivery of unlet space to the market along with a return to more normalised
Annual Report for 2020 showed that the Estate made its first acquisition in the Irish preserve the current ultra-low interest
up from 6.9% a year earlier, while and companies looking to sub-let surplus demand levels, should limit further
fastest growth in employment among market by purchasing Fitzwilliam 28 for rate environment which will support
prime headline rents finished the accommodation. This exerted downward increases in the vacancy rate. Pressure
IDA supported companies occurred €177.5 million. The building is currently capital flows into commercial real estate
year at €57.50 psf – down from pressure on prime headline rents which on rents will be location specific and
€62.50 psf last year in the pharmaceutical and food sector being developed by the ESB who agreed to and in particular office assets in 2021.
finished the year at €57.50 psf – down from dependent on tenant requirements.
where employment increased by 5.9%. lease the property in its entirety to Slack. Pent up demand is expected to result in
€62.50 psf last year.
Employment in the ICT sector also rose This was followed by the acquisition of the an increase in transaction volumes from
4. 1.4 million sq ft of office space was
DEVELOPMENT MARKET
completed in 2020. 2.5 million sq ft strongly by 5.6%. Elsewhere, exports of Looking ahead, we expect the office to Bank of Ireland headquarters at Baggot Q2 onwards with city centre assets with
is projected to be delivered in 2021 medicinal and pharmaceutical products remain the cornerstone of the modern 1.4 million sq ft was completed in 2020 Plaza by Deka Immobilien from Kennedy strong covenants on long leases expected
of which 62% is pre-committed and ICT services recorded annual growth workplace in recognition of the benefits including notable schemes such as Termini Wilson for €141.0 million – the latter to benefit.
of 17.8% and 9.9% respectively in Q3 2020 that it offers such as facilitating innovation (221,500 sq ft), The Sorting Office (203,700 having acquired the property as part of
5. €1.2 billion worth of office assets
according to the latest data from the CSO. through collaboration and learning, sq ft) and North Dock (201,100 sq ft).
were sold in 2020 in what was
attracting and retaining talent and Delivery in 2021 is expected to increase to
a healthy performance despite The ingredients for an even stronger TOP 5 OFFICE LEASING TRANSACTIONS
transmitting corporate culture. The vaccine 2.5 million sq ft, however 62% is already
the fact that many investors were economic performance in 2021 are
rollout has already prompted companies pre-committed. Notable completions will PROPERTY TENANT SECTOR SIZE (SQ FT)
unable to inspect opportunities due already in place. The vaccine rollout has
to consider their return to the office and include Spencer Place (430,000 sq ft),
to Covid-19 travel restrictions begun and as this accelerates we should ONE & TWO SOUTH COUNTY, DUBLIN 18 MASTERCARD TMT 249,164
their future office needs, however we are Boland’s Quay (210,000 sq ft) and Block 2,
see a gradual loosening of restrictions and FITZWILLIAM 28, DUBLIN 2 SLACK TMT 134,656
unlikely to see a significant recovery in Charlemont Square (170,000 sq ft).
greater economic activity. Additionally,
ONE STEMPLE EXCHANGE, DUBLIN 15 GUIDEWIRE TMT 85,000
the UK and the EU concluded a trade deal
2 BURLINGTON PLAZA, DUBLIN 4 AMAZON TMT 75,731
last December which effectively removed Fig 3. Dublin office
Fig 1. Office take-up Fig 2. Dublin prime office yields
BLOCK I, CENTRAL PARK, DUBLIN 18 GOOGLE TMT 75,294
Sq ft the biggest threat to Ireland’s Covid-19 and rents investment volumes
recovery plans. With these factors in Source: Knight Frank Research
4,000,000 Yields (LHS) Rents (RHS) €3,500m
mind, growth in the order of 5.0% is
3,500,000 8% €80
currently expected in 2021. €3,000m
3,000,000 7% €70 TOP 5 OFFICE INVESTMENT TRANSACTIONS
€2,500m
OCCUPIER MARKET
6% €60 PROPERTY VENDOR BUYER PRICE
2,500,000
5% €50 €2,000m
2,000,000 GLL REAL ESTATE
Take-up reached 1.5 million sq ft in 2020 4% €40 BISHOP’S SQUARE, DUBLIN 2 HINES
PARTNERS
€183.0m
1,500,000 €1,500m
– 55% below the level that transacted in 3% €30
AMUNDI
1,000,000 €1,000m FITZWILLIAM 28, DUBLIN 2 ESB €177.5m
2019. Although 823,000 sq ft was let in 2% €20 REAL ESTATE
500,000 the opening quarter – including 249,200 1% €10 €500m
BAGGOT PLAZA, DUBLIN 4 KENNEDY WILSON DEKA IMMOBILIEN €141.0m
0 sq ft to Mastercard at One and Two 0% €0 €0
JAYFIELD LTD &
2013
2015
2016
2018
2019
2020
South County and 134,700 sq ft to Slack
2014
2013
2015
2016
2018
2019
2020
THE TREASURY BUILDING, DUBLIN 2 GOOGLE €115.5m
2017
2014
2017
2013
2015
2016
2018
2019
2020
2014
2017
PERCY NOMINEES
at Fitzwilliam 28 – Covid-19 resulted
2 BURLINGTON ROAD, DUBLIN 4 HENDERSON PARK KGAL €94.1m
Source: Knight Frank Research in businesses quickly reassessing their Source: Knight Frank Research Source: Knight Frank Research
relocation and expansion plans. As such, Source: Knight Frank Research
2 3
DUBLIN OFFICE MARKET OVERVIEW Q4 2020 DUBLIN OFFICE MARKET OVERVIEW Q4 2020
R
D
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RR
UP
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LETTINGS, INVESTMENTS & DEVELOPMENTS IN 2020
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HI
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TL
RT
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AN
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Riverside One
N HILL
ET
CONNOLLY
DIN
STATION Date: Q2 2020 North Dock
ER
Yield: 4.03% Date: Q3 2020
UT I O
STR
Price: €37,500,000 Type: Development
O’CO
ET
Purchaser: IPUT
La Touche House Owner: TIO
S TIT
EET
TRE
Note: 29.2% share of the building Space Delivered: 201,061 sq ft
Date: Q1 2020
N
LOW
CON
SS
NELL
Yield: 5.31%
T No.3 Dublin Landings
ER
IEN
CH EE Price: €84,250,000 North Dock
ES TR
STRE
S SHERIFF ST Date: Q3 2020
ELL
AM
TE HENRY Purchaser: AXA IM – Real REET UPPE Date: Q4 2020
RF
PA RN STREET Assets/BCP Capital
R Rent: Confidential
Rent: €50.00 psf
IEL
ET
DA THE Take-up: 43,918 sq ft
EAST WALL ROAD
PHOENIX Take-up: 15,714 sq ft
L
VE CONVENTION
HALL P
PARK Tenant: Microsoft
STREET
CENTRE Tenant: Blueface
SMITHFIELD
24-26 City Quay Sector: TMT
Sector: TMT
GHAM ROAD Date: Q3 2020 2 WML
BLACK
AY
N QU
QUEEN
Type: Refurbishment Date: Q1 2020 3ARENA
Owner: Irish Life ED E Rent: Stepped rent rising Central Quay North Dock
HEUSTON Date: Q4 2020 Date: Q3 2020
Space Delivered: 90,000 sq ft S QUAY from €56.50 psf (2nd Floor)
STATION R GE CITY Rent: €53.00 psf Rent: €49.50 psf
GE O QUAY to €61.00 psf (5th floor)
Take-up: 31,301 sq ft
VICTORIA QUAY Take-up: 47,562 sq ft Take-up: 11,250 sq ft
ARR Tenant: Gilead
AN Q Tenant: Zalando Tenant: Hines
USH UAY Sector: Pharma
ER’S 42 Westland Row Sector: TMT Sector: Finance
QUA QUAY
Y WOOD Date: Q1 2020
PASS
D BY 1 GQ Type: Redevelopment GRAND
LIZO
BRID E S
E 1 HSQ Date: Q3 2020 CANAL 78 Sir John Rogerson's Quay
AP Owner: James & Patrick Dooley ENERGY
CH Date: Q4 2020 G Rent: €53.00 psf Space Delivered: 11,431 sq ft THEATRE
Date: Q1 2020
Rent: €36.00 psf Take-up: 42,060 sq ft Rent: €53.00 psf
TR PEA 76 Sir John Rogerson's Quay Take-up: 36,954 sq ft
Take-up: 43,668 sq ft EE Tenant: OPW TRINITY COLLEGE R SE S
THOM T Date: Q4 2020
Tenant: HSE AS S Sector: State DUBLIN T RE E The Sorting Office Tenant: Salesforce
TRE T Rent: €56.50 psf
Sector: State ET Date: Q3 2020 Sector: TMT
Take-up: 23,500 sq ft
T
Type: Development Note: Sub-lease
PATRICK STREE
Note: Sub-lease Tenant: Rabobank
EET Owner: Mapletree
STR Sector: Finance
ES
ET
GRAFTON Space Delivered: 203,700 sq ft 78 Sir John Rogerson's Quay
JA M
ST
N STRE
STREET Date: Q3 2020
ARE
E
ROAD
2 Cumberland Place Rent: €53.00 psf
AN
HAM Bishop’s Square The Treasury Building
KILD
D KIL MAIN EL Date: Q2 2020 GR Take-up: 20,493 sq ft
BO N AN
DAWSO
ROW Date: Q2 2020 Rent: €57.50 psf (averaged)
D
Date: Q1 2020
Tenant: Twilio
AR GOVERNMENT Take-up: 23,928 sq ft CA Yield: 4.32%
M 61 Thomas Street Yield: 3.97% Sector: TMT
BUILDINGS NA
Price: €183,000,000 Tenant: 3M LS Price: €115,470,000
Date: Q1 2020 Note: Sub-lease
KEV Purchaser: GLL Real Estate Partners Sector: TMT M TL Purchaser: Google
Type: Redevelopment IN S OU O
TRE WE
Owner: Oakmount ET NT R
UPP ST One Warrington Place
Space Delivered: 13,000 sq ft ER ST STEPHEN’S 30-33 Molesworth Street RE
GREEN E TL
Date: Q3 2020 OW Date: Q3 2020
ER UE
E T CUFFE ST Yield: 3.58% Rent: €61.00 psf BATH AVEN
RE Price: €59,500,000 Take-up: 13,637 sq ft
ST
RK Purchaser: KanAm Tenant: Regeneron
CO Block 4 & 5, Harcourt Centre One Park Place
CE
Sector: Pharma
DO
BA
RA
Date: Q1 2020
R
Date: Q1 2020
NO
S OU Note: Sub-lease
ET
PE
GG
TH
TER
RE
CIR Yield: 5.09% Rent: Confidential
UP
OT
E
LE
CUL
AV
TR
AR Price: €54,000,000 Take-up: 42,893 sq ft AVIVA STADIUM
ST
D
ORT
Kildress House
ES
ST
NR
EN
ROA
IL S
Tenant: Dropbox
LO
O
NO
CAMDEN STREET
Purchaser: Arena Invest
ON
D T
IAM
ING
UE
DO Date: Q3 2020
LSF
WE
S
Sector: TMT DD
SHELB
RTH
AS
LP
ST
HA
Type: Redevelopment
R
HIN
ILL
EAR
BR
RO
LO
Owner: McAleer & Rushe
UM
ZW
HATCH ST
CLAN
AD The Harcourt Buildings REE T
WE
OURN
Space Delivered: 22,216 sq ft
FIT
BER
Date: Q1 2020
R
LAN
Rent: €59.00 psf
E ROAD
Take-up: 14,236 sq ft Fitzwilliam 28 Baggott Plaza
DR
L OWE
Tenant: Nuance Communications Date: Q1 2020 Date: Q4 2020
CH
OA
Sector: TMT Rent: €56.00 psf Yield: 4.00%
AR
D
R
Take-up: 134,656 sq ft Price: €141,000,000
LE
Note: Sub-lease
M
Tenant: Slack Purchaser: Deka Immobilien
ON
Sector: TMT
UE
T
The Harcourt Buildings
ST
KEY 2 Burlington Plaza
N
Date: Q4 2020
One Hatch Street Fitzwilliam 28
VE
Rent: €56.00 psf Date: Q4 2020
I NE A
Date: Q1 2020
RA
Date: Q4 2020
Take-up: 11,065 sq ft Rent: Confidential
Yield: 4.01%
NE
LETTINGS Yield: 3.97%
Tenant: Pimco LE Take-up: 75,731 sq ft
Price: €35,100,000
NT
Price: €177,500,000
LA G
INVESTMENTS Sector: Finance ES Tenant: Amazon
Purchaser: KanAm Purchaser: Amundi Real Estate ON
E
Note: Sub-lease Sector: TMT
H RO
RP
DEVELOPMENTS ST
UP
SE
Note: Sub-lease
DART RAIL LINE PE
R
AD
Block D, Charlemont Exchange
LUAS TRAM LINE Date: Q1 2020 45 Mespil Road 2 Burlington Road
LUAS TRAM LINE Type: Refurbishment Date: Q1 2020 Date: Q3 2020
Owner: Vestus Type: Refurbishment Yield: 4.30%
Space Delivered: 31,684 sq ft Owner: Davy Price: €94,100,000
Space Delivered: 47,456 sq ft Purchaser: KGAL
4 5
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0 THE GLOBAL PERSPECTIVE ON PRIME PROPERTY & INVESTMENT
2020 — 14TH EDITION
Ross Fogarty, Director
The Wealth Report The London Investor
2020 Bulletin Winter 2020 ross.fogarty@ie.knightfrank.com
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