The Dublin office market has registered the highest-ever level of take-up for the first half of a year, with 1.717 million sq ft of space transacted in the six-month period to the end of June.
But while that figure may be a record, it masks a dramatic contrast in the performance of the sector between the first and second quarters.
The latest analysis from Knight Frank shows that just 317,000sq ft of office space transacted in the second quarter of this year, less than half the five-year average and the lowest since the equivalent period in 2013.
The largest deal of the quarter was the letting of 49,291sq ft to Paddy Power at Blocks 7 and 8 of the Belfield Office Campus in Dublin 4. Paddy Power has been the largest tenant at the Belfield Office Campus since 2011 when it moved its headquarters there from Tallaght, taking 120,000sq ft across Blocks 1, 2 and 3. This latest letting is understood to have been taken on a short-term basis while they refurbish the three existing buildings, which they will move back into upon completion of the upgrading works.
Elsewhere, Genesis Aviation became the first tenant at Green Reit's Block I, Central Park, in Dublin 18, taking 24,706sq ft at the recently completed building. The deal follows a €50 million investment in the firm by the Ireland Strategic Investment Fund (ISIF) last year, a move designed to support the company's plans to scale its business in Ireland.
At Phoenix House in Dublin 8, the OPW has leased two floors of newly refurbished space from Bartra Capital totalling 22,683sq ft. The remainder of the space in the 38,000sq ft building is also occupied by the OPW, meaning that the State is now the sole occupant of the building.
Interestingly, three of the top five deals took place outside the city centre, with non-city centre locations accounting for a total of 55 per cent of take-up. This is in contrast to the first quarter of this year when only 38 per cent of deals were outside the city centre.
The growing importance of the co-working sector was again evident in the second quarter with WeWork taking 18,158sq ft at George’s Quay House – their seventh deal in Dublin since entering the market in the final quarter of 2017 – while Pembroke Hall took 15,946sq ft at Ballast House. The latter occupies a prominent location on the junction of Aston Quay and Westmoreland Street and was purchased in Q2 by German fund, Union, for €26.9 million.
The risk... is that the market will suffer from a continued shortage of office space rather than an oversupply of it
Unusually for the Dublin market, TMT (technology, media and communications) accounted for a low share of activity, with just 9 per cent of take-up, with professional services taking the top spot with a 16 per cent market share. Co-working, finance and the state sector all had a market share of 11 per cent respectively. A wide variety of sectors comprised of the remaining 42 per cent of take-up.
The relatively-quiet second quarter performance of the Dublin office market is in contrast to the preceding quarter in which some 1.4 million sq ft was transacted. The first three months of the year saw five deals all larger than the largest letting in the second quarter. The largest of these was the pre-letting of 430,000sq ft at Spencer Place in the Dublin docklands to Salesforce, which was the biggest single letting in the history of the State. The second-largest deal was the sale of Nos 4 and 5 Dublin Landings to the Central Bank of Ireland, which together will extend to 201,000sq ft with completion due for later this year. The third-largest deal was the pre-letting of 182,000sq ft at The Distillers Building in Smithfield by the OPW with completion due in 2021. The remaining two deals were Facebook's taking of 174,000sq ft at Nova Atria South in Sandyford while Docusign took 99,000sq ft at 5, Hanover Quay.
Deals in the offing
While the outlook for the remainder of 2019 is positive, with a strong pipeline of deals in the offing, Knight Frank says it is unlikely that the record of 3.9 million sq ft recorded in 2018 will be surpassed. Last year's number received an unprecedented boost from the 870,000sq ft mega letting by Facebook in Ballsbridge.
Commenting on the latest figures, Knight Frank’s director of office, Declan O’Reilly, said: “The office market is in a very good place at the moment, with robust occupier demand being facilitated by a dynamic construction market which is delivering the new office space that firms need to expand.
“Despite some commentary suggesting that we should be fearful of the number of cranes appearing on Dublin’s skyline, 91 per cent of the new offices delivered between 2014 and 2018 have now been let while 39 per cent of the forecast delivery between 2019 and 2021 is already let. The risk, therefore, is that the market will suffer from a continued shortage of office space rather than an oversupply of it.”