A fresh wave of coronavirus cases and lockdown restrictions quickly dissipated much of the optimism in the market coming into 2021. Activity was negatively affected with just 18,209sq m (196,000sq ft) transacting in the first half of the year. However, the rollout of vaccinations allowed businesses to plan a phased return to the office which facilitated an uplift in activity in the second half. A strong finish to the year is anticipated, with a small number of large deals transacting including An Post and TikTok signing at The Exo Building and The Sorting Office respectively. These deals could bring full-year take-up to between 111,000sq m (1.2 million sq ft) and 134,000sq m (1.5 million sq ft).
As we turn the corner on 2021 though, hopes that we would be doing the same with Covid-19 have stalled on the back of another surge in cases and Nphet advice that employees should continue to work from home. However, with the prospect of vaccine boosters and anti-viral drugs on the horizon, occupiers will view the latest surge as a transient rather than a protracted situation and will continue to plan their return to the office allowing the momentum that has built up over the last six months to continue into 2022.
We anticipate that the transition to hybrid working will gather pace in 2022, creating some uncertainty for employers. For example, with some employees at home and some in the office, it is unsurprising that Aon’s Business Risk Index – a survey of 160 businesses across Ireland – reported that 60 per cent of employers are unsure about the impact of hybrid working on their businesses’ ability to innovate. Ultimately, the success of hybrid working will rest on balancing what employees want and what is workable for employers. Finding this balance will require much experimentation over the coming two to three years.
Sustainability
The office will assume a heightened role as a hub that supports interaction, collaboration, education, and socialisation. Corporate brand and image will also be important. So, in addition to prioritising buildings with the best flexibility, amenities, connectivity, and technology, occupiers will also demand sustainable properties as people increasingly expect companies to deliver environmental as well as financial returns. As the recovery intensifies and given the tight pipeline of the 176,516sq m (1.9 million sq ft) that is due to be delivered in 2022, 52 per cent is already pre-committed – we anticipate strong competition for sustainable buildings which will act as a tailwind for rents next year. Buildings that do not satisfy these requirements will suffer from an increasingly smaller target audience and are likely to experience rental deflation.
In conclusion, 2021 has been a year of two halves and despite the uncertainty created by the current surge in cases and the dynamics shaping post-pandemic real estate, we expect that the momentum that has built up in terms of activity over the last six months will continue into 2022.
Declan O’Reilly is director of office agency and tenant representation at Knight Frank Ireland
