Surplus space in 77% of Dublin offices because of downsizing

ONE OF THE key findings in a survey on the Dublin office market suggests that 77 per cent of occupiers have surplus office space because of the difficult business climate.

The study by agents Lisney mainly concentrated on the professional services sector in the city centre with an average of 54 employees. Those involved in the survey occupy 120,774sq m (1.3 million sq ft) or 3.5 per cent of Dublin office stock.

Given the difficult business conditions prevailing, many companies are continuing to consolidate and downsize and report that surplus space has become an issue. From the sample survey, 77 per cent said that their office accommodation was not used to full capacity while 67 per cent had up to 25 per cent of space unoccupied. Only 1 per cent of those surveyed had surplus space equating to over 75 per cent of their total holding. Around 20 per cent of tenants have either sublet or returned space to their landlord as they consolidate their operations.

The average employee in Ireland has a floor space ratio of between 15sq m (161sq ft) and 17sq m (183sq ft ) compared to 12.40sq m (133sq ft) across Europe.

The survey showed that 22 per cent of those questioned owned their buildings while the remaining 78 per cent were on leases. A previous study in the 1990s found that only 10 per cent of those questioned were owner-occupiers. Lisney said that the most likely reason for the increase in owner-occupation was the low interest rate environment and the greater number of business owners investing in commercial property as part of their personal pension provision.

With 23 per cent of the Dublin office market vacant, Lisney says that service charge liability is now becoming a major concern for landlords who have to pick up any shortfall from unoccupied space. With new utility providers entering the market and existing providers becoming more diversified, significant savings could be made on power, heating and IT. Cleaning and security costs could also be reduced by between 5 and 10 per cent. The report also showed that 38 per cent of the tenants surveyed had reduced costs by renegotiating their leases. However, more than 37 per cent of occupiers have not tried to reduce their service charges in the past two years.

The survey found that companies looking for office accommodation still considered rent to be the most important factor with building specification and layout in second position. The survey also showed that car parking and fit-out costs are only of average importance when deciding on a new building.

“While parking would have been of greater importance in the past, its decline in significance is most likely due to fewer staff numbers and improved public transport. We are experiencing this in the market and in recent months have been involved in a number of transactions where tenants have not taken their full allocation of car parking.”

Only a quarter of those questioned in the survey said that the green agenda was affecting their property choices. About 60 per cent said they would not spend more on accommodation with green features and a similar number said they would not consider retro-fitting their accommodation to make it more energy efficient.