Dublin office market bounces back but still lags pre-Covid levels

Take-up in the Dublin office market recovered strongly in the first quarter after grinding to a halt last year, but still remains about 24 per cent behind the ten-year average for the period, according to new data from property group Savills Ireland.

The market reached 477,000sq ft across 40 deals in the opening quarter of the year, which was a significantly better result than the same period of 2021 when just 22,000sq ft transacted across just seven deals.

However, activity has a way to go before it attains pre-pandemic levels, with take-up 24 per cent below the ten-year first quarter average and 57 per cent below the first quarter of 2020.

Stock in the city centre remained in high demand and accounted for 81 per cent of total space taken and for all of the top five deals, illustrative of the demand for centrally located offices as the office market recovered from pandemic.

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Savills said the “hub-and-spoke working model” popularly discussed at the onset of the pandemic “appears to have dropped” as occupiers pivot back to the centrally located offices.

The Exo Building on the north docklands was the largest deal of the quarter, as An Post leased 79,000sq ft. When complete, the building will be the highest office building in Dublin at 17 storeys.

The deal drove the share of space taken by the public sector to 17 per cent, well above the 11 per cent ten-year quarterly average.

After a fall in market share last year, accounting for 31 per cent of take-up for full-year 2021, tech firms have made a return as the most active sector with over 220,000sq ft leased and a market share of 47 per cent in the quarter.

The largest tech deal took place at the recently completed 10 Hanover Quay, which American fintech firm Fiserv leased in its entirety.

Currently located in Clonskeagh, the deal represents the firm relocating from a suburban location to the CBD amidst plans to expand its Irish workforce by 300 employees.

Savills director of research John Ring said: “With office occupier employment having grown during the pandemic but strategic office decisions effectively stalled, key decisions on real estate portfolios now need to be made.

“We therefore believe that there is a significant amount of pent-up demand that will be released in 2022.”

Savills said occupiers continue to focus on ESG with energy efficient offices playing an “important role” in the environmental segment. Grade A properties accounted for nine of the top 10 deals as tenants showed “a clear preference” for offices that meet these criteria.

“Post-pandemic clarity following the phasing out of restrictions will stabilise the hybrid office model,” said Mr Ring. “We expect employers to use high-quality fit-outs and centrally located space to encourage workers to return to the workplace.

“Face-to-face contact has proven crucial to many tasks, particularly for those that require collaboration with colleagues. Well-lit, open-plan offices with break-out spaces may particularly appeal to both employers and employees.

“Uncertainty remains regarding the final shape of the proposed hybrid model, but best practice will inevitably emerge over the course of 2022 as occupational theory meets practice.”