City’s office sector set to ring in the changes

It is a much brighter outlook than what many expected just six months ago. In the first half of 2021 , just 209,000 sq ft of office space was let across Dublin. This, said property consultancy HWBC, was an 81 per cent decline in take-up on 2020.

Prime rents softened to just under €58 per sq ft, down 7 per cent to a five-year low. By mid-June, the overall market vacancy rate stood at just over 10 per cent, with many companies looking to sub-let. HWBC estimated that sublets accounted for 24 per cent of available city centre space. By October, requirements had jumped to 4.4 million sq ft, according to figures from CBRE.

Tech and professional services firms, which accounted for half of all rental take-up in Dublin, drove demand, according to Aisling Tannam of Cushman & Wakefield. Wix, an Israeli software company, increased its office capacity from 13,000 sq ft to 50,000 sq ft, taking on space at the Reflector building on Hanover Quay. Toast, a restaurant software company, agreed to sub-let the former offices of the social media company Reddit, which is moving to Capital Dock in the docklands.

Other tenants on the move in the new year could include Datadog and Pinterest. Demand from the tech sector could reach record levels despite the dire warnings of a working from home revolution.

“There was close to 1.6 million sq ft of space reserved or signed to tech tenants by the end of the third quarter this year, which has surpassed a previous peak of 1.3 million sq ft,” Tannam said.

Stripe, the payments technology giant set up by the Collison brothers, is among those seeking space. Property sources say the company could even purchase a building rather than lease one.

If so, the Collisons will have competition. Total office investment in the first nine months was €772 million, according to Knight Frank. The market is offering a keen sub-4 per cent yield to a strong mix of investors. Blackstone acquired Colony Capital’s majority stakes in Burlington Plaza, home to Amazon, and Three Ireland’s headquarters on Sir John Rogerson’s Quay. The Facebook Ballsbridge deal will brings its spend to €650 million. French investors Sofidy and Amundi have been active, as has the German company Commerz Real AG, which spent €152.3 million on a pair of 21-year-old buildings, Hibernia Reit’s One and Two Dockland Central.

John Ring, head of research with Savills, said the market started to see a divergence in values between newer and older buildings. “Occupiers are conscious of environmental concerns. On the investor side, they are greening their portfolios as they try to get to net zero carbon, many by 2030,” he added.

Rita Carney from JLL said it is “less about a green premium for your building and more about the brown discount”.

“If your building does not achieve ESG [environmental, social and governance] objectives, you will not get a tenant to occupy the building,” she added.

Niall Gaffney, chief executive of Iput, a Dublin-focused real estate company, said that demand for ESG compliance is coming equally from tenants and investors, swayed by the arguments of green campaigners such as Greta Thunberg. It has been fundraising with foreign investors, typically long-term pension funds and insurers. They “want portfolios with good ESG credentials”, he said. “We can also see that the enlightened companies, be that LinkedIn or others, are looking for these credentials in order to recruit the best college graduates.”

It is completing a €20 million programme of refurbishment on buildings in its portfolio, including Riverside II in the docklands, to reduce emissions from its standing investments by 40 per cent.

Buildings it cannot refurbish will be demolished, and rubble recycled. Iput tore down the old IDA building at Wilton Place, and is delivering 600,000 sq ft of space to LinkedIn by 2023, at a rent roll of more than €30 million.

It forms part of some 5.2 million sq ft of office space that is under construction in the Dublin market at present. Savills anticipates 2.3 million sq ft to be delivered in 2022, but says 58 per cent of the space is already committed. A further 2.1 million sq ft will be completed in 2023, a quarter of which is already pre-let.

All the big developers are still rolling onward. Ronan Group Real Estate, which will complete Fibonacci Square for Facebook next year, has started construction of the Aqua Vetro building on Tara Street: 22 storeys of office space, due for completion at the end of 2023 or early 2024. It has more than 1 million sq ft planned at its Waterfront and former Glass Bottle sites in Dublin’s docklands.

Marlet is doing the groundwork for 570,000 sq ft of offices at College Square beside Hawkins House in Dublin city centre. Ballymore has won planning permission to build two office buildings, comprising 460,000 sq ft, and a hotel at Dublin Arch, beside Connolly station. Newcomer Shane Whelan’s Westridge Real Estate has planning for a €475 million redevelopment of the former DIT Kevin Street campus, which includes a couple of 11-storey blocks and 299 build-to-rent apartments.

The pandemic may not have dampened developers’ ardour, but it will bring changes. CBRE’s Dowling said the pandemic has created a scenario whereby more office space will be needed for fewer people. “We used to do 100 sq ft per person, now we’re probably talking 120 or 130 sq ft per person,” Dowling said. More space for office Christmas parties.

PROJECTS DUE FOR COMPLETION IN 2022
• Salesforce Tower and Fibonacci Square: Johnny Ronan’s 437,000 sq ft Salesforce Tower is due for completion early next year. Fibonacci Square in Ballsbridge, where Facebook will take nearly 400,000 sq ft, should be finished in mid-2022.
• One Charlemont Square: Part of McGarrell Reilly’s 355,000 sq ft Charlemont Square development, the nine-storey No 1 is due for completion in the first quarter of 2022.
• Tropical Fruit Warehouse: Iput’s renovation of the Victorian warehouse on Sir John Rogerson’s Quay will see it supply 80,000 sq ft to the market, from April.
• 60 Dawson Street: Across from Trinity College, on the site of the old Nassau House, 145,000 sq ft of office space is due for completion in 2022.
• Cadenza: Irish tech company Intercom is due to move into its new headquarters at Earlsfort Terrace early in the new year.
• Exo Building: While the lease for An Post’s new headquarters isn’t signed yet, David McRedmond and his team will likely move to the Exo building, Dublin’s highest office block at 79 metres, early next year.
• Shipping Office: Completion of Marlet’s 180,000 sq ft Shipping Office on Sir John Rogerson’s Quay, is due for the third quarter of 2022.