12 Feb 2021 | 08.59 am
Dublin Office Rents Decline 10%
Estate agent HWBC bullish on office recovery
12 Feb 2021 | 08.59 am
Office rents for prime city centre office space in Dublin have fallen around 10% in the past 12 months due to the impact on the market caused by the Covid-19 pandemic, according to estate agent HWBC.
Publishing its 2020 Office Review, HWBC said that take-up of new space fell to its lowest level since 2012 as companies postpone long-term letting decisions. However, the estate agent believes the market slowdown is likely to be short-lived.
HWBC monitored rent levels of €59 per square foot in December 2020, down from the peak of €65 psf a year earlier, the lowest level since 2016. Just on 1.6 million square feet of space was let in 2020, down 49% on 2019.
The vacancy rate at end-2020 was 9.5% with an increase of ‘grey’ space coming to the market. HWBC estimates that the ‘grey market’ accounts for around 25% of available space and is competing with traditional landlords, often offering more flexible terms.
HWBC’s report states that 5.1m square feet of new space is due to come to market in 2021/22 as construction developments are completed. Half of this is pre-let, leaving a ‘manageable’ 2.35m sq ft to be occupied.
Big tech companies accounted for seven out of the ten largest lease deals in 2020. Commitment to physical space despite increased working from home was evidenced by Amazon’s leasing of 75,000 sq ft at Burlington Plaza, while TikTok is also lease up to 500,000 sq. ft. of space in Dublin for its European headquarters.
Managing director Tony Waters (pictured) commented: “By summer we anticipate that rollout of the Covid-19 vaccine and likely improving economic sentiment will restore potential occupiers’ ability to make long-term decisions. Investors and potential occupiers face a narrow window of opportunity to strike before the appetite to acquire and lease space returns with a vengeance.”
In Waters’ opinion, while companies may look to trim their office portfolios in the short term, the vast majority will not materially reduce their footprints. His colleague Paul Scannell added: “It is increasingly clear that the role of the office will remain relevant in whatever emerges as the new reality post-Covid.”
The HWBC commentary also makes the following observations:
• The overall vacancy rate increased to 9.5% by year end 2020 due to a combination of reduced demand, corporate disposals of ‘grey space’ and a drop in the level of pre-commitments for new space.
• There has been an increase in the volume of offices available to sub-lease (or assign) as some companies look to off load surplus space. ‘Grey’ or fitted space now accounts for around 25% of available space and competes with the Landlord market and is generally available on more flexible terms.
• The level of pre-lets for new stock completed in 2020 has dropped to 37% down from a high of 82% in 2018, an important lead indicator for depth of demand.
• HWBC expecte few new starts on site this year as the current pipeline of space is leased up.
• Of the CBD space due for completion over the next 24 months, a healthy 54% is reserved. This will increase with fewer new starts and increased occupier activity as businesses recover in the second half of 2021.
• Excluding reserved space there will be approx. 2.35m sq ft of new CBD space available over the next two years, equating to one year’s take up in terms of the long-term average tenant demand.