Can Dublin’s office blocks be turned into housing?

Down at the end of Dublin’s Hanover Quay, beside the great sea locks of the Grand Canal, US developer Kennedy Wilson is building an office block behind the retained triple gables of an old warehouse. The hoarding bears a slogan similar to those of many such schemes, reading “An industrial past, an innovative future”, and advertises a 6,350sq m (68,400sq ft) office development to be let by Knight Frank.

“Who exactly is this for?” is the obvious question that springs to mind, given that we’re still in the midst of a deadly pandemic, which has emptied office blocks in Dublin’s “Silicon Docks” and elsewhere as the staff who once occupied them work happily from home.

Indeed, even the future of the office as a place of work has been called into question, not just in Ireland but all over the world.

The trend will be accelerated here by the recent Making Remote Work initiative, which envisages that some 20 per cent of public servants would be permitted to work remotely on a more permanent basis by the end of this year. Private-sector office workers would also be given a yet undefined “legal right” to request their employers to permit them to work from home at least some of the time.

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A straw in the wind was Google’s abrupt decision last September to pull out of plans to lease the Sorting Office, a high-grade block containing 19,300sq m of office space developed by Marlet on a site previously occupied by An Post and already pre-sold for €240 million to Singapore-based Mapletree Investments. Ironically, the gleaming new block now stands vacant on Misery Hill.

This sent shock waves through the Dublin office market, which had been booming before Covid-19 upended the world. As chartered surveyors JLL noted, the pandemic had an “immediate impact” on the sector and “slowed down the pace of office take-up demand across the world, which resulted in the lowest take-up of office space in Dublin on record” during the second quarter of 2020.

Quoted rents for prime city-centre office space fell marginally from €60-€65 per square foot to €55-€60 per square foot in the third quarter, and are likely to fall still further – at least until the long-term future of the office becomes clearer. Given that €60 per square foot equates to an eye-watering €646 per square metre, prospective tenants are surely doing their sums to calculate whether they really need the space.

But Conor MacCabe, managing director of HJL Architects, believes it’s too soon to write the obituary for the office building. He says most of the office blocks under construction are already pre-let to corporate tenants. These would include much of what’s being built in Dublin’s Docklands as well as other huge projects that HJL are involved in, such as Amazon’s new European headquarters on Charlemont Street as well as four blocks to be built at Wilton Place.

Unlike what happened in the property crash a decade ago, when numerous office projects were “pulled” because developers simply ran out of money to fund them, MacCabe says that activity in the sector “paused for a bit” after the pandemic hit home last March and then “picked up again” as developers, investors and prospective tenants took a longer view of how it would all pan out.

He points out that some office employees often worked from home before Covid came along and the pandemic has “vastly increased” this trend. But many younger workers now want to get back to the office at least a few days per week, sooner or later, he says. “Their career, their training and learning, their food, their fitness, their social life – it’s all in the office. They don’t want to be at home,” he says.

Pre-pandemic, big tech companies such as Google and Facebook tricked out their offices with funky artworks and inspirational slogans on the walls, chill-out zones, micro-kitchens, in-house restaurants, landscaped rooftop terraces, pool tables, yoga spaces and even prayer rooms. The whole agenda was to draw employees into a corporate culture that promoted creativity and a sense of wellbeing.

MacCabe cites return-to-work surveys showing a predicted “attendance” in the office of about 45 per cent of the pre-pandemic number, peaking at up to 70 per cent on some days of the week, after the virus has been brought under control. And they will be returning to a very different office environment, with more space between work stations, more hot-desking, larger meeting rooms and bigger lifts.

The traditional HR obsession with staff being physically present in the office – “presenteeism” – has been seen off by Zoom and hard evidence that people working from home are at least as productive, if not more so, without the distractions of an office environment.

Facebook has projected that 50 per cent of its global workforce could be remote-working from home in five years. Yet in 2018, Facebook signed up for a 25-year lease on Fibonacci Square, a 32,500sq m office development on the former AIB Bankcentre site in Ballsbridge, with the intention of relocating its EMEA (Europe, Middle East and Africa) headquarters there.

The deal is said to be worth a total of €600 million to Ronan Group Real Estate, run by Johnny Ronan, and its partners, Colony Capital.

Working from home may not be so appealing on a long-term basis for younger people sharing small apartments, which constitute much of what’s being built or planned. Unless communal workspaces are provided in the increasingly common “build-to-rent” (BTR) schemes of one or two-bedroom units, they would have to make do with parking their laptops on kitchen tables or on desks in bedrooms.

For many living in Dublin’s extended commuter belt, usually in three-bedroom houses, the chance to work from home has been one of the great boons of Covid – even though it’s less than ideal for those with children under foot.

A likely growth areas will be in remote-working “hubs” in regional towns with good broadband links, thereby boosting the local economies.

Office blocks

Conversely, the dramatic decline in the number of staff working in office blocks in Dublin has left the “ecosystem” of cafes, bars, restaurants and convenience stores that grew around them high and dry. Working from home or from hubs elsewhere could also turn expensive office blocks into “stranded assets” in economic terms, sending rents and capital values into a downward spiral over time.

So what about the prospect of converting office blocks in Dublin for residential use? Easier said than done, according to Conor MacCabe. Contemporary office buildings tend to have large floor plates and single service cores (consisting of lift shafts, stairs and toilets), so it would be a challenge to convert them into apartments with their own kitchens, bathrooms and balconies or other private open space.

Even facades would have to be replaced, so effectively it would mean stripping an office building back to its structural frame.

“The possibility of city-centre office blocks being repurposed for residential use is not on the agenda because their value as office space is higher than if it were residential,” MacCabe says. In any case, apart from BTR schemes, the economics of developing apartments in Dublin, even from the ground up, is “marginal”, which is one of the main reasons we have an endemic housing crisis.

MacCabe believes that office conversions to residential may occur, but these would be likely to involve older office blocks in “edge-of-city” locations. In 2019, for example, Harcourt Developments secured planning permission to convert two office blocks on its Park West campus in west Dublin into 34 one-bedroom and 50 two-bedroom BTR apartments, a five-minute walk from the local rail station.

A 2013 relaxation of “permitted development rules” in England, exempting conversions of office or retail buildings to residential use from planning control, was intended to boost the supply of housing and aid urban regeneration. However, with some 20,000 such projects being “waved through” every year without proper inspection, there are concerns that these are producing substandard homes.

In 2018, the Royal Institution of Chartered Surveyors found that only 30 per cent of the new homes procured under the relaxed rules met national space standards while some of the new housing schemes ended up in the middle of industrial estates. “Too many substandard developments were allowed through”, according to architecture firm Resi, which specialises in high-quality homes.

MacCabe says architects should be thinking about designing “open buildings” that would be more flexible and more easily capable of being adapted for other uses in the future.

Living over the shop

The most obvious place to start in making room for more residential in the city centre would involve converting the often-vacant upper floors of retail buildings into apartments. But although “living over the shop” has been an urban planning mantra for years, there is not much to show for it – primarily due to over-stringent building regulations, particularly in relation to fire safety and universal access.

Number 1 Capel Street, which features in a James Malton print from the 1790s, was recently restored to provide three apartments – albeit for tourist short lets – above two retail units on the ground floor. Similarly, a derelict mid-18th century house on Henrietta Street was rescued from ruin and turned into seven luxurious apartments – the “Henrietta Suites” – here again aimed at the short-let market.

Generations of Dubliners lived in buildings such as these, just as they lived in the grand Georgian houses on Merrion Square and Fitzwilliam Square. Yet with relatively few exceptions, most of these buildings are now in use as offices, with their rear gardens paved for car parking– unlike in Edinburgh’s 18th-century New Town, where the housing stock is still largely in residential use.

The Fine Gael, Fianna Fáil and Green Party programme for government Our Shared Future pledged to introduce a new scheme to “expand and build on” the Living City Initiative, targeted at regenerating historic areas with very limited success so far. If tax incentives were provided to make it attractive to return Georgian Dublin to residential use, we would be within reach of achieving the “15-minute city”.

Three ways to keep Dublin city living

Open building design: Facing an uncertain future, architects should work on designing "open buildings" that would be more flexible and more easily capable of being adapted for different uses.

Living over the shop: It's the most obvious place to start in making room for more housing in the city centre: convert the often-vacant upper floors of retail buildings into apartments. Though it has been an urban planning mantra for years, there is not much to show for it – primarily due to stringent building regulations.

Make Georgian houses houses: Generations of Dubliners lived in the grand Georgian houses on Merrion Square and Fitzwilliam Square – as well as other dwellings from the period. Most are now offices, with rear gardens paved for parking. Offer tax incentives to make it attractive to return Georgian Dublin to residential use.