Dublin Office Market – Current State of Play
As a follow up to James Mulhall’s recent office market update, we sat down with him to get his thoughts on the current state of play.
MM: How would you summarise the year so far?
James Mulhall: In a word – Quiet. We got so used to big pre-lets and lettings that once these dried up, it felt like a chasm had been created! However, we are now adjusting to what I would describe as an early 2000’s ‘Normal’ Dublin office market level. Q1 & Q2 were slow but activity levels (albeit at lower 0-10,000 sq.ft. size range) have picked up in Q3. Tech slowdown/retreat has led to an increased supply of New Grade A stock which is competing (for the first time on any significant scale) with New Grade A ‘Landlord Controlled’ stock. Quoting rents are holding firm in this space but with the lack of big requirements in the market, pressure may force one of the other to ‘blink’. This is likely to occur by way of increased rent free/incentive packages as opposed to headline rent reductions. I expect a busy end to the year but at SME level.
MM: Where are we now on WFH & BITO (Back in the Office) strategies from what you are seeing?
James Mulhall: That depends on the type of industry you are in and whether you belong to an international or domestic company. Irish owned businesses (particularly Professional Services) is the main one back 4 x days per week from what I experience. International companies are still 2 – 3 days BITO and this seems to be a company wide mandate with local operations free to alter if they wish. The main concern with these companies is trying to work out if they will require the same amount of ‘Post Covid’ space when lease renewal time comes. My expectation is that the vast majority will not.
MM: Where have all the ‘Big Demand’ gone? What’s replacing it?
James Mulhall: You have to remember the old adage about an Office Market being a subset of the economy in which it sits. Over the past 9 months, our economy has experienced high inflation, significant interest rate rises and felt the real effect of the Tech Slowdown in the office market. Economic pressures feed into business leaders mindsets when it comes to growth or contraction. Our office market heavily relied on the Tech Sector in recent years in terms of huge pre-lets/lettings on Grade A stock. That’s pretty much gone now and replaced by sub-letting of the excess space that was assumed once needed. As the headline grabbing take-up becomes more normal for the size of the Dublin Market, the traditional 0 – 10,000 sq.ft. SME sector is once again responsible for the vast majority of deals (75-85%) quarter on quarter. I expect this to be the case for a while so buildings can get ahead and start deploying Multi-Let strategies. In particular, there is an opportunity for Grade A stock here as there is a shortage of high quality options available, particularly in the CBD.