Office take-up in Dublin may be half this year's forecast due to Covid-19

13/05/2020 - 05:00

By Tommy Barker

IPUT plc (‘IPUT’), Ireland's leading property company and the largest owner of offices and logistics assets in Dublin, has pre-let the remaining 430,000 sq. ft. of office space at Wilton Park on a 25-year lease, with a term certain of 12 years, to LinkedIn, the world’s leading professional network. Construction at Two, Three & Four Wilton Park will commence in 2020 and is targeted for completion in 2023.

TAKE up of office space in Dublin this year is likely to be half the amount  forecast as recently at the start of this year, due to the impact of the Covid-19 virus, which is also expected to badly affect the co-working niche sectors.

That’s according to research from BNP Paribas Real Estate, who now say they expect 150,000 -175,00 sq m of space to be taken up in the capital, compared to their QI estimate of 300,000 sq m.

In contrast, Cork city has c 46,000 sq m, or c 500,000 sq ft of offices under construction with a number of deals secured on new stock, and/or in advanced negotiation.

BNP this week note “a standstill’ in the Dublin office pipeline, with a slowing of demand as companies review lease agreements and future needs, and will base future decision or reviews of productivity among other issues, as well as “a reduction in the completion of already advanced lease negotiations.

In addition, space requirements in the initial search phase have been halted until the situation has re¬turned to normal or at least some of the lockdown measures have been relaxed.”

Coming just a day after Twitter globally announced giving all of its employees the option to work from home in the future, BNP’s Keith O’Neill predicted not only a longer term assessment of teleworking, but also “the desire of users to move into buildings with high sustainability ratings may prompt other changes.

"Healthy buildings which have WELL or LEED sustainability certification mean that companies can more easily invest in the health, wellbeing, productivity and efficiency of workers will be the most sought-after,” he commented.

Mr O'Neill said he didn’t expect office rents to go down in the short term, but the crisis will halt rises and “we do expect the incentive packages for tenants to be increased.” 

He said that post- the 2008 economic crash, employers reduced average floor area needs per employee from 12-14 sq m to 7-9 sqm, and said Covid-19 was likely to also have long-term impacts on office use and layout.

Separately, Mr O’Neill said the rapidly-expanded co-working and business centre sector “is struggling on two counts in the current crisis. First,  because of the widespread shutdown of activity which is affecting all people means the space is simply not being used by its entrepreneurial user base who are back to working from home.

“Secondly many corporate users, because they are not tied to traditional lease arrangements do not control the premises or the activities carried out in the centres. Lack of obligation means they are free to abandon business centres for the time being.

There has been a great deal of uncertainty in this sector and many questions have been raised how will activity return to flexible work space?

"Will users be more reluctant to share space with other users in a closed environment? Will user demand reduce?" asks Mr O’Neill, while also raising the prospect that with a rise in home and remote working “will there be an increased demand from companies seeking additional work space to socially distance workers once the lockdown restrictions have been removed?”

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