The rise of internationally traded services – a consequence of shifting global consumption patterns, the internationalisation of business processes and more sophisticated accounting practices within multinationals, has led to the presence in Dublin of outward-facing corporations whose activities are decoupled from the size of the domestic economy. This is one of the primary findings of the latest Savills ‘Dublin Office Market in Minutes’ Report released today.
Savills says that strong jobs growth in 2018 fed directly into a record year for Dublin office lettings. Office based employment in the capital rose by 12,300 persons, leading to a sharp rise in office space consumption.
Dr. John McCartney, Director of Research at Savills noted,
“2018 was a record-breaking year for Dublin’s office market with companies taking-up nearly 350,000 sq m of space. This was partly due to a continued increase in the average letting size. Transactions of 5,000 sq m or more were once a rarity in Dublin but there have now been 21 of these in the last 15 months. The largest was the 80,826 sq. m pre-let to Facebook at Bankcentre in Ballsbridge. But even without this 2018 would have been the fourth strongest year of take-up in the history of the Dublin office market”.
The Globalisation Effect
McCartney says he expects continued inward investment, attracted to Ireland by favourable blend of “natural advantages” and that foreign capital is driving larger space requirements;
“The use of English as the main spoken language, the country’s strong cultural ties with the US, a business-friendly environment and policy choices that have consistently embraced globalisation are all leading to a continued inflow of foreign capital. The incoming operations often serve a global audience from their Irish base and, as a result, their business space needs have decoupled from the size of the domestic economy.”
Because of this Savills says that the average office letting has doubled over the last 5 years. And, according to Andrew Cunningham, Savills Director of Office Agency, office blocks in Dublin are getting bigger to meet this demand.
“The size of the average new office block in Dublin is now over 7,000 sq m compared with 2,900 a decade ago, 2,800 in 1998 and under 1,300 sq m in 1988.”
Savills note that the vacancy rate in Dublin’s office market is now 8.1% - its lowest since 2000. This is despite 462,402 sq m of new office space being completed in the city since mid-2015. Andrew Cunningham notes that new office deliveries in 2019 will be around 13% down on 2018, meaning that the vacancy rate is unlikely to rise meaningfully over the next 12 months.
Elsewhere in the report, Savills note that there is good demand for smaller lettings – in the sub 7,500 sq. ft. category – which are available on flexible leases. However, where longer-term leases are the only option, occupiers are increasingly looking at serviced offices which provide flexibility.