Take-up of office space in Dublin drops by half as pandemic stalls activity
Savills report predicts hybrid work model won’t damage demand going forward
Despite pandemic, Savills insists outlook for the sector remains strong on the back of pent-up demand
The take-up of office space in Dublin fell by almost 50 per cent last year as business activity stalled in the face of the pandemic, a report by estate agent Savills has found.
While the slowdown is likely to continue into the first half of 2021, the report said the outlook remained strong on the back of pent-up demand and a further influx of business from London’s financial sector in the wake of Brexit.
Savills also predicted that the shift to a hybrid model of work – with employees splitting their time between the office and home – would not lead to a fall-off in demand for office space as some have claimed.
In the company’s latest review of the capital’s office market, it noted that the take-up of office space in Dublin last year totalled 161,322sq m, down from over 300,000sq m in 2019.
The numbers, however, did not accurately demonstrate “the true impact of Covid”, it said, noting that nine of the top 10 deals occurred in the first quarter. The largest two deals in the final quarter of 2021 were Amazon’s letting of a 6,938sq m space at Burlington Plaza 2 and airport authority DAA’s 4,100sq m leasing of Three Airport Central.
The report found that while employment had fallen as a result of restrictions to curb the spread of Covid-19, the share of office-based employment has stayed relatively steady, which bodes well for the future.
“The vaccination programme, too, is representing light at the end of the tunnel albeit slower than the market would have wished for,” John Ring, director of research at Savills Ireland, said. “If successful, the path back to the office in a significant way could be under way by the second half of the year.”
In its report, Savills also predicted a further Brexit boost for the sector.The fact that the final Brexit deal did not include financial services is likely to offer some opportunity to the Dublin office market, it noted, “with firms that had, to date, only made a foothold presence in Dublin, now making moves to scale up their operations”.
The report disputed what it described as the dominant media narrative, suggesting businesses were shifting away from Dublin’s central business district in favour of suburban locations as a result of the pandemic.
It also said the likely shift to a new model of work after coronavirus won’t necessarily translate into a significant office footprint reduction, once firms allow for surge capacity for the “popular days” and office space is adapted to facilitate lower density, collaborative workspaces in the office.
Technology firms were, once again, the most active sector in Dublin’s office market in 2020, with information and communications technology accounting for the top 10 deals year and 70 per cent of take-up last year.
The report concludes that take-up of office space will be “reduced in the first half of the year but emerging new demand” will emerge as “many occupiers maintain their wait-and-see approach in the face of uncertainties around the final trajectory of the virus”.