DOUF FBILCI NE MARKET
2022
OFFICE RESEARCH
Q 2 2022
Q2 2022 KEY TRENDS
MARKET ACTIVITY
firms have led the way, and they have accounted for just over half of all office take-up in Dublin since the start of 2017. Financial services firms accounted for 29% of take-up – their largest share for over 5 years. Waystone took 4,382 sq m at 35 Shelbourne Road in Ballsbridge, while Caceis and Western Union took 1,223 sq m and 1,097 sq m respectively in the Bloodstone Building 2 and Richview Office Park in Clonskeagh. With many organisations still developing their hybrid working strategies, and with increased macro uncertainty, there is strong occupier demand for business space that is available on flexible terms. Consequently serviced office suppliers are enjoying strong occupancy and are back in the market seeking space. Glandore took almost 2,400 sq m at the Bottleworks in Barrow Street, while Pembroke Hall, which took space in Glendenning House on Wicklow St. during Q1, followed-up
Fifty-seven office deals were signed in Dublin between April and June, the busiest quarter for transactions since 2019. These deals encompassed 46,194 sq m of space; marginally ahead of Q1, but up almost 3x year-on-year. The four quarter moving average in Figure 1 shows that leasing is on a broadly positive trajectory, but still remains below pre- Covid levels. The largest transaction in Q2 was the pre-let of 8,179 sq m to TMT company Service Now at 60 Dawson Street. Cloud computing firm Workday, which has been present in Dublin for some years, took just over 5,000 sq m at the newly refurbished Dockline building in Mayor Street. Unsurprisingly, given the lessees in the quarter’s biggest deals, TMT was the largest taker of Dublin office accommodation, accounting for 38% of the quarterly total. This is the 16th time in the last 22 quarters that tech
46,194 sq m TAKEN-UP IN DUBLIN IN Q2 JOHN MCCARTNEY Director & Head Of Research BNP Paribas Real Estate
46,194 SQ M TAKEN-UP nearly 3 times the
Office demand supported by STRONG SERVICE SECTOR JOBS GROWTH
(Covid affected) Q2 2021 figure HOWEVER THE SPACE-PER-EMPLOYEE RATIO HAS FALLEN as macro-uncertainty and hybrid working make
New office completions exceeded net absorption in H1 2022 CAUSING A PICK-UP IN VACANCY
by leasing a further 906 sq m in nearby Dame Lane this quarter. This pattern is set to continue with Iconic, WeWork and Regus seeking additional space for their portfolios.
occupiers more cautious and less clear about their long-term space requirements
FIGURE 1: DUBLIN OFFICE TAKE-UP BY QUARTER
FIGURE 2: SECTORAL SHARE OF TAKE-UP, Q2 2022
Strong occupier demand, and the relative scarcity of ESG compliant buildings, have driven PRIME HEADLINE RENTS TO €673 PER SQ M PER ANNUM (+6.8% Y/Y). However vacancy uptick is keeping average rents in check
DEMAND FOR MODERN, ENVIRONMENTALLY SUSTAINABLE OFFICES means most new buildings are being leased before, or shortly after, completion
160,000
1%
1%
140,000
14%
3%
2%
25%
29%
120,000
38%
11%
100,000
8%
18%
19%
80,000
7%
7%
LOOKING AHEAD, APPROX. 240,000 SQ M OF STOCK WILL BE ADDED IN 2022 against gross take-up of approx. 200,000 sq m for the year
7%
5%
2%
1%
60,000
n Aircraft Leasing n Finance n Health & Pharma n Industry n Other n Professional n Public n Serviced Office n TMT
40,000
20,000
0
4QMA
Take Up
Source: BNPPRE
3
Q 2 2022
FIGURE 4: AVERAGE OFFICE-SPACE-PER-EMPLOYEE INDEX, DUBLIN 1
MARKET DEMAND
Office demand is ultimately a function of the number of desk-based jobs, and the amount of space assigned to each employee. FIGURE 3: DESK-BASED EMPLOYMENT AND OCCUPIED OFFICE SPACE: DUBLIN
105
100
350
5.0
95
4.5
300
90
4.0
85
250
3.5
3.0
80
150
2.5
2.0
100
1 The space-per-employee ratio is computed as the tenanted stock divided by total employment in the Dublin NUTS 3 region, in the following sectors; TMT (NACE group J), Professional Services (M), Admin Services (N), Public Admin (O), Finance, Insurance and Real Estate (K,L). On this basis the average space per employee in Q2 2022 was 12.6 sq m. This quantum should be considered indicative for two reasons. Firstly, the methodological approach assumes all jobs in the named sectors are desk-based, and that no desk-based jobs exist outside of these sectors. This is clearly a simplification. Secondly, the Labour Force Survey, which provides our employment data, assigns employees to regions based on place of residence rather than place of work. Therefore employees who work in Dublin but live in surrounding counties are excluded. Notwithstanding these limitations, the approach is consistent over time, and the data are presented in index form to emphasise the trend rather than the absolute quantum of space assigned.
Source: CSO and BNPPRE *Q2 Labour Force Survey employment figure due 25th August 2022. Interim estimate based on more timely monthly data from the CSO’s employee series from administrative data.
Employment
Occupied Space
war in the Ukraine, have made organisations more cautious, and less certain about their long term business space requirements. Protem, this may be making them less willing to commit to more office space, resulting in declining space-per-employee ratios as extra staff are onboarded. A further unresolved question is whether organisations will use hybrid working to rationalise their office space – a strategy that would also reduce the space-per-employee ratio. In reality, it is too early to say how this will play-out as many firms are still in the process of developing their remote working strategies. Indeed, the first evidence of any structural change is likely to emerge outside Ireland, in locations where shorter leases provide earlier opportunities for occupiers to recalibrate their business space holdings. What we can say for now is that agents are experiencing a continued gradual improvement in market activity, but are reporting that deals are taking longer to complete and that occupiers are advancing cautiously due to the factors outlined above.
Dublin's labour market has enjoyed a strong rebound with 37,500 desk-based jobs created between January 2021 and June 2022, an increase of 14.1%. Office leasing has benefited, with 243,269 sq m being taken in the same period. However, as shown in Figure 3, the increase in tenanted office space (+2.9%) has lagged behind the rebound in employment. This reflects a 9.8% decline in the average allocation of office space per employee (Figure 4). The disconnect between jobs growth and office leasing may be just a timing issue; Theory suggests a natural lag between organisations hiring workers and taking-on additional business space, simply because it takes time to locate and acquire appropriate space – particularly where ESG criteria are being targeted. In this context the recent surge in service sector employment augurs well for continued improvements in office leasing and absorption in the coming quarters. However accumulating macro risks, including rising interest rates, slowing economic growth, stock market volatility, continued Covid outbreaks and
SUPPLY AND VACANCY
they relocate, and due to the take-up of grey space which is already tenanted. In net terms, therefore, supply has outstripped demand nudging the overall vacancy rate from 10% last December to 11.4% at the mid-year point.
Over 130,000 sq m of new office space was completed in Dublin in the first six months of 2022. Most of this was let-up prior to, or shortly after completion, reflecting occupier demand for well- located, environmentally sustainable offices - and the relative scarcity of these buildings. On the demand side, 91,290 sq m of space was leased in H1. As usual, however, absorption was lower due to some organisations leaving vacancy behind when
RENTS
Strong occupier demand for new, ESG compliant offices, and the relative scarcity of these within the overall stock, has led to headline rents for the best buildings being bid up strongly. Prime headline rents have risen to €673 per sq m per annum – an uplift
of 6.8% year-on-year. However, rising vacancy is keeping rents for less prime buildings in check, and average headline rents in the city centre remain in line with or marginally below their pre-Covid levels.
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5
Q 2 2022
KEY INSIGHTS
N 80 % 36,785 sq m 2022 Q2 Take-Up 46,194 sq m E W S HOWTH 6 % 15 % SUBURBS 2,673 sq m 6,736 sq m DF RUI BNLGI NE (DUBLIN 3,6,7 and 8) DUBLIN CITY (DUBLIN 1,2 and 4)
OUTLOOK AND CONCLUSION
Last December we forecast Dublin office take-up of approximately 200,000 sq m in 2022. At the half-way point of the year 91,290 sq m has already been taken, and a further 120,000 sq m is reserved, leaving us on target to achieve this.
MALAHIDE
SWORDS
DUBLIN AIRPORT
PORTMARNOCK
full-year forecasts remain on-track, vacancy should rise to just over 11.6% by year end.
On the supply side, we predicted c.240,000 sq m of new office completions. Over 130,000 sq m has been delivered in H1 and, even allowing for some slippage in build programmes later in the year, our completions forecast is also looking accurate. As a result 2022 will be the strongest year for office completions since 2008. Although leasing activity is trending positively, absorption has not matched the pace of new office deliveries, causing the vacancy rate to rise. If our
COOLOCK
SANTRY
FINGLAS
SUTTON
BEAUMONT
The pick-up in vacancy has not prevented prime headline rents from rising strongly, and more upside can be expected before year-end as occupiers chase a limited number of modern, energy efficient offices. However increased competition will continue to impact on the older stock, where rising rent-frees are being observed.
KILBARRACK
DRUMCONDRA
CASTLEKNOCK
CLONTARF
CHAPELIZOD
BALLYFERMOT
DUBLIN CITY
RANELAGH
CRUMLIN
WALKINSTOWN
TERENURE
CLONSKEAGH
At the half-way point of the year 91,290 SQ M OF SPACE has already been taken and 120,000 SQ M IS RESERVED. This leaves us on course to achieve take up of 200,000 SQ M IN 2022.
The average office space-per-employee ratio has FALLEN by 9.8% in the last 18 MONTHS
BLACKROCK
DUNDRUM
DÚN LAOGHAIRE
TALLAGHT
STILLORGAN
RATHFARNHAM
GLENAGEARY
SANDYFORD
LEOPARDSTOWN
CARRICKMINES
CHERRYWOOD
CITY CENTRE
SUBURBS
Service sector employment growth has been exceptionally strong, and office leasing is on a broadly positive trend
Highest Rents Number of Deals Average Deal Size Typical Lease Break
€721 per sq m 60 Dawson Street, Dublin 2
€ 3 6 1 per sq m Suite 404, Q House, Sandyford, Dublin 18
Strong occupier demand, and the relative scarcity of ESG compliant buildings, have driven prime headline rents up by nearly 7% in the last year. However older buildings are facing less competition and this is keeping average rents in check
36
17
1,022 sq m
395 sq m
Agents are reporting up to 400,000 sq m. of outstanding office space requirements. Converting this into absorption will depend on how confident occupiers are to look-through current macro uncertainties, the impact of their hybrid strategies on space-per-employee ratios, and the extent to which those taking space are expanding or entering the market for the first time, rather than simply relocating
10 years
5 years
<500 SQ M 500 / 999 SQ M 1,000 / 1,999 SQ M 2,000 – 4,999 SQ M 5,000 – 9,999 SQ M >=10,000 SQ M
City Centre City Fringe
17
13
2
2
2
0
3
0
1
0
0
0
KEITH O'NEILL Executive Director & Head of Office Advisory, BNP Paribas Real Estate Ireland
JOHN MCCARTNEY Director, Head of Research, BNP Paribas Real Estate Ireland
Suburbs
13
3
1
0
0
0
6
7
Q 2 2022
TOP DEALS
BNP PARIBAS REAL ESTATE NEWSFLASH
TOP 10 DEALS
SOME OF OUR CURRENT PROJECTS
BUILDING
LOCATION
TENANT
SQ M
BNP Paribas Real Estate acted on behalf of developer Infinity Capital in securing Mastercard as a Tenant at the South County Office Campus, Dublin 18. The letting of One South County, which was completed in 2020, saw Mastercard lease 13,463 sq. m. of Grade A office space. Two South County, reached practical completion in April 2022. This brings MasterCard’s total footprint to 23,207 sq. m. in this high-profile suburban campus style development which is home to Mastercard’s new European Tech Hub. One & Two South County Business Park, Sandyford, Dublin 18 # 1
60 Dawson Street
Dublin 2
Service Now
8,179
1
1st, 2nd 3rd & 5th Floors Dockline, Mayor Street
Dublin 1
Workday
5,009
2
35 Shelbourne Road, Ballsbridge
Dublin 4
Waystone
4,832
3
The Bottleworks, Ringsend
Dublin 4
Glandore
2,393
4
Block W, Eastpoint Business Park
Dublin 3
Pinceila
1,533
5
North Dock 2
Dublin 1
HEAnet
1,459
6
The Bloodstone Building
Dublin 2
Caceis
1,223
7
Block 9, Richview Office Park, Clonskeagh
Dublin 14
Western Union
1,097
8
3009 Lake Drive, Citywest Business Campus
Dublin 24
Meridian Global Services
929
9
10 5 Dame Lane
Dublin 2
Pembroke Hall
906
# 2
# 3
Block 5, Irish life Centre, Lower Abbey Street, Dublin 1
Glencar House, Merrion Road, Ballsbridge, Dublin 4
BNP Paribas Real Estate has been appointed by Depfa Bank Plc to sublet Part 3rd & 4th floors, Block 5, Irish Life Centre. The 4 storey over basement office development which forms part of the landmark Irish Life Business Campus underwent a major refurbishment programme in 2017 including significant upgrade works to the public realm. Offices suites are available in sizes ranging from 335 sq. m. to 1,837 sq. m. and come with the benefit of secure on-site car parking.
BNP Paribas Real Estate has been appointed to act as joint letting agent on Glencar House, Dublin 4. Designed by Reddy Architects, Glencar House is a new 6-storey over double basement Grade A office building extending to a net internal area of to 6,968 sq. m.. The office building is designed with sustainability to the forefront and has a targeted A3 BER and LEED Platinum rating. The building is also targeting the highly coveted WELL V2 Core Platinum and Wired Score certifications. Construction on the site is in progress and the property is due for practical completion in May 2023.
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Q 2 2022
Q 2 2022
CONTACTS
# 4
57 Adelaide Road Dublin 2, Ireland +353 1 661 1233 realestate.bnpparibas.ie
Fleming Court, Fleming Lane, Dublin 4
PSRA No: 002702
BNP Paribas Real Estate is delighted to be instructed as letting agent for Fleming Court, Dublin 4 on behalf of French Financial Institution Sofidy. Developed in 2001, Fleming Court comprises a 5 storey modern office building. Three self-contained office suites are currently available to lease on the ground, first and second floors extending to 175 sq. m., 277 sq. m. and 504 sq. m. respectively.
KEITH O'NEILL EXECUTIVE DIRECTOR
HEAD OF OFFICE AGENCY T +353 1 661 1233 M +353 86 857 9696 keith.oneill@bnpparibas.com
JOHN MCCARTNEY DIRECTOR & HEAD OF RESEARCH BNP PARIBAS REAL ESTATE T +353 1 661 1233 M +353 87 974 8485 john.mccartney@bnpparibas.com
JOHN CANNON ASSOCIATE DIRECTOR OFFICE AGENCY
At BNP Paribas Real Estate our people work with you to build targeted and integrated real estate solutions for your every need: Property Development, Transaction, Consulting, Valuation, Property Management and Investment Management. With our international scope, expertise and on-the-ground presence, you will find the perfect partner that can ensure the success of your real estate projects.
# 5
# 6
Trintech Building, South County Business Park, Dublin 18
One Warrington Place, Dublin 2
T +353 1 661 1233 M +353 87 396 6725 john.cannon@bnpparibas.com
BNP Paribas Real Estate is delighted to announce 3 recent lettings in Trintech Building in South County Business Park. Renewable energy company Codling Wind Park, printing company MemJet and aircraft leasing company Alliance Aviation have all agreed to new leases within the building ranging in sizes from 223 sq. m. / 2,400 sq. ft. to 511 sq. m. / 5,500 sq. ft. on lease terms from 5 – 10 years. BNPPRE is now marketing the 2 remaining office suites in the building, 1st floor extending to 501 sq. m. / 5,394 sq. ft. and 2nd floor extending to 198 sq. m. / 2,129 sq. ft.
BNP Paribas Real Estate on behalf of Centrica Plc has recently let 1st floor, One Warrington Place, Dublin 2 to Mars Capital. The property is a striking landmark corner office building located in an unrivalled location in Dublin City Centre. The 1st floor comprises 710 sq. m of fully fitted, Grade A accommodation and has been let on a 4 year sublease. Terms have also been agreed with a global occupier on the 6th floor of the building.
DISCLAIMER: BNP Paribas Real Estate is a wholly owned subsidiary of the BNP Paribas Group, the leading global Financial Institution. All rights reserved. The report was prepared by BNP Paribas Real Estate Ireland. All data provided in the publication have been carefully verified, however the authors of the report shall not be held liable for any damage or loss which may arise from the use of the data published. Reproducing, modifying or using any of the contents hereof without the permission of the authors of the publication is prohibited under the provisions of the applicable law. It is permitted to quote the contents of the publication only when clearly stating the source.
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Real Estate for a changing world
Real Estate for a changing world
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