Dublin ‘grey market’ office subletting rises to 24% amid Covid

The level of “grey market” subletting has risen to 24 per cent of all activity in the central Dublin office rental market, as businesses work out how much space they will need as they plot a return of staff back to the workplace as Covid-19 restrictions continue to ease, according to commercial property firm HWBC.

The figure for the first half of the year is up from an estimated 15 per cent before the pandemic struck and is expected to rise further in the first half of next year as companies make decisions on future space requirements, the firm said in a report on activity in the first half of the year.

“Occupier patterns are still in flux regarding the return to office and remote working; however, an encouraging number of high-profile companies are paving the way for a safe and measured return to the workplace over the next three to six months,” HWBC said.

“The narrative emerging highlights the importance of ‘face to face’ interaction and collaboration of employees in the workplace from both a wellness and culture perspective, and employee preference for a hybrid working model has been accepted for the time being.”

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With businesses set to start bringing workers back to the office from September 20th under the Government's planned easing of coronavirus restrictions, a KPMG survey, published last week, found that less than a quarter of Irish chief executives expect to cut their office footprint following the pandemic, down sharply from 88 per cent a year ago. Still, nearly two-thirds think office employees will do at least two days a week at home.

HWBC said that an 81 per cent decline in take-up of new office space in the 12 months to June has seen rent levels soften in the Dublin office market, though the lifting of restrictions and successful vaccine rollout has led to a “marked increase” in tenant activity in recent months.

Dublin city-centre grade-A rent levels were being set, on average, at €57.50 per square foot in the first half, down 7 per cent compared with last year and at their lowest level in five years. Just 209,000sq ft of space was let in the first half of the year, according to the report.

Assuming no serious Covid variants emerge, HWBC expects that 2022 will see a return to more normalised levels of demand activity with transactions back to the long-term average for the market. This will likely see rents stabilise and then return to growth from 2023 onwards.