Latest research from Cushman & Wakefield reveals an interesting quarter for the Dublin office market. Take up in Q2 2021, as expected, continued to struggle with just 19,150 sq m occupied. However, outside of take up, the story of improved demand is best reflected in reserved figures once again, along with a rise in requirements and viewings.
A total of 46,350 sq m was reserved in the second quarter, a notable rise from under 20,000 sq m in the opening quarter. This brings total reserved space in the market to 86,450 sq m our highest level since Q1 2020.
Although there is still some way for the market to go in order to reach full pre-covid levels of activity, these figures paint a clear turn in sentiment from 2020 and solidify the office’s continuing role in the future.
Commenting on the market Ronan Corbett, Head of Offices at Cushman & Wakefield Ireland: “Our Cushman & Wakefield demand tracker has seen a noticeable pick-up in activity in the last 6 months with many occupiers now planning their post-Covid return to work. The tracker is showing over 3.7m square feet of unsatisfied demand across Dublin. Employment growth in the Tech sector in particular has driven a lot of this. If all of this demand was satisfied, it would equate to almost 2 years of ‘normal’ take-up which is an enormous figure.”
Outside of demand, the supply story within the office market also provided interesting results. An increase in the volume of space released to the market, largely in the form of subleases, pitted against low take up saw availability rise. This follows little change in availability in the opening quarter of the year, as lockdown prevented market churn to a large degree. Further adding to market churn, was the completion of 26,200 sq m of new and refurbished space. For the entire market, vacancy reached 13.2%, up from 9.2% in the same period last year. In the CBD, it was 11.3%.
Given the improvement in signed and reserved space in the quarter, net vacancy rates, which strips out signed/reserved units, recorded smaller gains in the three-month period. However, compared to a year previous the rise in net vacancy rate is more pronounced. In the CBD for example, the net vacancy sits at 7.3% up from 6.8% in the opening quarter and 4.3% in Q2 2020.
Adding further, Kate English, Chief Economist, Head of Ireland Research and Insights Ireland: “The rise in availability and vacancy rates over the past twelve months is not unexpected. This will continue over the coming quarters as more space under construction reaches completion. The improvement in reserved figures however reinforces our stance that this is a temporary rise, which at present is expected to move downwards towards the second half of 2022 and into 2023.”
The total volume of space under construction at the end of quarter two was 421,485 sq m, a rise of 8.6% in the quarter, as we saw construction commence in four different locations. The commencement of new space was again positive news for the market.
Lastly, prime headline rents remained largely unchanged in the second quarter at €656 per sq m. However, terms and incentives are continuing to be where the market sees the largest changes, therefore impacting net effective rents.