Reasons To Be Cheerful: 6 Experts On Why Dublin Real Estate Is Looking Up
When international tech giants began talking redundancies, consolidation and flexible working, digital-dependent Dublin wondered whether it had backed the wrong horse.
Yet the Irish capital has largely escaped the worst of those personnel cutbacks, and while the investment and occupier markets cooled, Q2 figures suggest they are gently bubbling again.
It will take awhile for surplus space to be absorbed, for grey space to find favour again and for the ongoing issues around housing supply to be resolved, but there are clear signs that Dublin’s fortunes have improved.
With the sun shining, metaphorically and meteorologically, Bisnow asked six industry specialists to give their opinions on why they believe there are reasons to be cheerful about Dublin’s commercial real estate market.
Natalie Brennan, Head Of Property Transactions, Aviva Life & Pensions
One of the largest investors in Ireland, Aviva believes that increased occupier activity is providing a positive signal to the investment community. Head of Property Transactions Natalie Brennan is speaking at Bisnow’s next Dublin event, Ireland Office Summit: Attracting the Workforce, on 25 September.
“It is estimated that the total size of the Dublin office market now stands at close to 52M SF, having grown in excess of 20% since 2012,” Brennan said. “While office takeup for 2023 was down compared to the 10-year average, the Q2 2024 figures is showing a takeup of approximately 934K SF as the strongest quarter since Q4 2021, which signals a more promising outlook for the second half of 2024.
“Several large lettings and assignments were agreed at One Wilton Park, The Shipping Office and 3-8 Hume Street with BNY Mellon, Stripe, EY, and Iconic Offices, while in the suburbs lettings were completed with APC in Cherrywood and John Paul Construction in Termini, Sandyford. A letting was also completed in Swords Business Campus to the HSE, which also acquired the Seamark Building in Elm Park.
“This rebound in office occupational activity has already started feeding into the investment market, where Q2 2024 investment spend was €514M, over 50% higher than the same period in 2023, bringing the investment spend year to date to €676M.
“Office investments sales accounted for roughly 18%, whereas retail accounted for 34% of the spend in the quarter. The market has continued to attract new French investors, including Arkea REIM, Altixia REIM and Alderan, which were active alongside established investors such as Deka, Iroko Zen and private Irish investors also remaining acquisitive. We are hopeful that this positive demand will continue through the second half of the year.”
Tim Wilks, Director, Lane7
Multi-activity entertainment operator Lane7 was founded in 2013 and is opening its first Dublin location close to St. Stephen’s Green in October, followed by a second venue in Dundrum in November. Lane7 Director Tim Wilks is speaking at Bisnow’s London event Driving Footfall: Retail & Mixed-Use Real Estate on 11 September.
“Dublin offers a fantastic opportunity for a multi-experiential leisure concept like Lane7, which seeks to redefine competitive socialising across markets,” Wilks said.
“Dublin is a vibrant city with a great mix of young people as well as families, all seeking a comprehensive entertainment experience. In recent years, there’s been a big uptick in demand in Ireland for leisure offers, which combine a central offer such as bowling with a range of alternative sporting experiences. We have been looking to establish a presence in the EU for some time, following the success of Lane7 in more than 15 venues across England and Scotland.
“The two Dublin sites we have acquired — one edge of town, one central — will allow us to adapt the Lane7 offer to suit specific local market opportunities. With the Irish economy starting to send out some positive signs after a long period of uncertainty, it is currently one of the most attractive EU markets to support a leisure concept. Going forward, we will continue to explore opportunities for new venues across other parts of Ireland and the EU, as well as in the UK.”
Niall Gargan, Head Of Research, JLL
Adviser JLL reported a promising uptick in activity in the Dublin commercial real estate market.
“With a number of black swan events and the recent tech crunch impacting the economy, it was not surprising that leasing activity in Dublin paused last year and persisted through the opening quarter of 2024,” JLL Head of Research for Ireland Niall Gargan said.
“Occupiers were hesitant to execute long-term strategies amidst the uncertainty. However, with clarity now on the horizon, the best-in-class space within the city centre will transition from lying dormant to becoming the most sought-after, as it becomes a finite resource with a dwindling pipeline for new developments.
“The approaching deadline for ESG goals by 2030 further highlights the increased demand for such spaces. Consequently, 2024 is anticipated to be a robust year for office leasing in Dublin, with several large requirements expected to be signed in H2, pushing leasing volumes beyond the 2M SF mark.
“Although vacancy rates remain elevated at 15.7%, it is crucial to shift focus from the current vacant office space, which is in a temporary transition due to economic conditions, towards the impending challenge of what to do with the 61% of Dublin office space that JLL has identified as becoming functionally obsolete within the next five years. Building owners within the 39% of future-proof offices will be well positioned to reap the rewards as occupiers migrate to more suitable spaces.
“The Dublin office market is facing an impending squeeze for the ‘right space,’ which will begin to play out from 2027 onwards.”
Emma Kennedy, CEO And Founder, Grafter
The Dublin flexible office market has slowed in tandem with the broader office market. But one of the main players in the sector said the flex segment is on the verge of a rebound.
“The Dublin flex office market is showing signs of resilience and cautious optimism as we approach the second half of 2024 to 2025,” Grafter CEO and founder Emma Kennedy said.
“One key factor driving this is the increasing demand from the likes of tech firms, attracted by Dublin's strong tech ecosystem and favourable business environment. We have seen many recent announcements of tech firms opening offices in Dublin. The appetite for flexible workspace solutions is buoying the market, even as traditional leasing faces challenges.
“There are also positive signals regarding the economic environment. Expectations of a reduction in interest rates could stimulate investment and business expansion, further boosting demand for flexible office spaces.
“Although slowing, the hybrid work model has remained, with many companies seeking flexible office arrangements to accommodate varying employee needs. This flexibility is particularly appealing in uncertain economic times, as it allows businesses to adjust their space requirements without long-term commitments. Additionally, the quality and variety of flexible office offerings in Dublin have been improving. This comes from the market needs of high-end amenities and technology that they can offer to their employees.
“Looking ahead, the market in Dublin is likely to continue benefiting from these trends. As economic conditions stabilise and the tech sector remains robust, I predict that the demand for flexible workspaces will continue to grow. This positive outlook provides a foundation for cautious optimism for the Dublin real estate market in the coming months and into 2025, especially for businesses looking to move away from traditional leases.”
Colin Richardson, Head Of Research, CBRE Ireland
CBRE’s latest figures suggest that takeup and investment volumes will start to pick up in the second half of 2024 and grey space absorption is continuing.
“Total Irish office investment in Q2 was €90M across six deals, accounting for 18% of all investment in the Irish market in Q2,” Head of Research for CBRE Ireland Colin Richardson said.
“Total office investment in H1 totalled just over €118M, and the first truly core office investment trade in the Dublin market since 2022 completed with the sale of 40 Molesworth Street for €37.5M, fully let to UK law firm DLA Piper, with ancillary retail let to Specsavers. Deka Immobilien acquired the building from State Street at a competitive net initial yield.
“The number of core investors assessing office opportunities in the market remains relatively shallow. However, French SCPI funds, private high net worth individuals, and developers continue to actively view potential office acquisitions, where priced appropriately.
“High-yielding secondary offices with good location characteristics and/or repositioning potential are still attracting investor interest. Considering current ongoing sale processes, the level of investment in the Irish office sector will continue to pick up in H2 2024. A number of receivership sales remain ongoing, while recent opportunities launched to the market include the Fumbally Estate in Dublin 8, which is being marketed on behalf of BCP Capital with a guide price of €25M.
“The absorption of Dublin grey space continued in Q2 with deals at 1 Windmill Lane, Dublin 2, and 35 Shelbourne Road, Dublin 4. Assignment and sublease transactions accounted for 23% of takeup in Q2 and have now accounted for 22% of all takeup in the year to date. We expect some notable transactions involving prime-located grey space will close in the second half of this year.”
Sarah McDonnell, Director of Project Management, TFT Dublin
Independent real estate and construction adviser TFT said that environmental, social and corporate governance is key to the longer-term future of the Dublin office market.
“Our experience of the Dublin market reflects strong confidence in the region from investors and occupiers around the world,” Director of Project Management Sarah McDonnell said.
“We are currently helping firms from diverse sectors including aircraft leasing, technology and pharma to secure premium office premises, as well as research and development space. In addition, a number of major HQ relocations and consolidation projects have been driving, and will continue to drive, a welcome uptick in activity from office occupiers committing to the city.
“However, Dublin’s attraction doesn’t mean that tenants don’t have clear expectations on sustainability. If the region’s office stock can continue to meet these expectations, it will continue its upward trajectory. But that also means more existing buildings in the city will need ambitious retrofit or refurbishment works.
“The Irish government has set the benchmark for its public buildings. They must all be rated BER B or higher for energy efficiency by 2030. Unless landlords upgrade their buildings, we can expect public occupiers to use lease breaks to vacate underperforming spaces in the coming years, opting for high-performing spaces which will be well placed to welcome them as strong tenants.
“Occupiers in every sector now factor their ESG goals and energy use into lease decisions. They understand that their offices need to work harder for them. But vacating underperforming buildings for new ones is not the solution. Owners must take this market activity as a sign to act swiftly on improving their existing properties with a holistic view of performance. Rating systems such as NABERS are a good starting point, and multidisciplinary teams of surveyors, engineers and sustainability specialists are essential to deliver works which provide carbon and cost savings for occupiers.”
