While office leasing volumes rallied in the third quarter, with a 125 per cent increase in activity compared to the previous three-month period, the full-year figures for 2020 look set to be defined by the impact of the Covid-19 pandemic.
That’s the key finding in CBRE’s latest report on the Dublin office letting market, which is due for publication today.
According to its analysis, some 131,262sq m (1,412,892sq ft) of office leasing activity was recorded in the capital in the first nine months of this year. While the figure is described by CBRE as “respectable”, it represents a 32 per cent drop on the figure for the equivalent period in 2019.
The fall off in performance can be attributed to the combination of the direct impact of the Government’s imposition of the lockdown in the second quarter, when less than 10,000sq m (107,639sq ft) of office leasing deals were signed, and the deferral of decision making by businesses in the face of the ongoing uncertainty being caused by Covid-19.
Notwithstanding this year-on-year decline, CBRE’s head of investor leasing, Alan Moran, says it is encouraging that some 33,000sq m (355,209sq ft) of office accommodation had been reserved in the capital at the end of the third quarter.
According to CBRE’s research, 29 office leasing transactions were signed in Dublin in the three months to the end of September 2020 compared with 37 in the same period last year. This brings the total number of office leasing deals completed in the first three quarters of this year to 75, compared to 136 in the same period last year. Significantly, most of the transactions signed in the last six-month period have been relatively small with no transactions extending to more than 4,645sq m (50,000sq ft) signed in either the second or third quarters, compared to seven such transactions signed during the first three months of the year.
Another decline was noted in terms of active requirements quarter-on-quarter with overall demand standing at approximately 237,500sq m (2,556,428sq ft) at the end of the third quarter – down 13 per cent on the previous quarter and down from a record 430,000sq m (4,628,481sq ft) at the beginning of the year.
Most of this decline is a result of companies putting expansion and relocation plans on hold due to current uncertainty. The current level of demand is, however, still higher than the long-term average for the city. Some 74 per cent of the requirements at the end of the third quarter were specifically focussed on Dublin city centre.
The overall rate of vacancy, meanwhile, rose quarter-on-quarter from 6.65 per cent at the end of the second quarter to 8.64 per cent at the end of the latest quarter, driven to a degree by the Sorting Office building moving from ‘reserved’ status back to ‘available’, some new buildings reaching practical completion during the quarter and companies putting surplus accommodation onto the market.
At the end of the third quarter, there were 35 office schemes under construction in Dublin city centre extending to more than 490,000sq m (5,274,316sq ft) between them, of which 57 per cent has already been pre-let.
Commenting on the current debate in relation to the future of the office, Marie Hunt, executive director and head of research at CBRE, said: “The consensus view at this juncture is that a blended approach is the most likely scenario longer term with workers opting to work remotely part of the time but still basing themselves for the most part in an office environment – albeit one that is configured differently to allow for appropriate social distancing.”