Take-up in the Dublin office market in Q1 reached almost 100,000m² - 50% higher than the 5-year average for Q1 take-up in the capital, boosted by the carryover of some transactions from 2019, accroding to the latest findings by CBRE. The true impact of the Covid-19 lockdown on transaction volumes in this sector wont manifest until Q2 figures are compiled at the end of June. Many office leasing transactions have understandably been put on hold indefinitely as occupiers put off decision-making and adopt a ‘wait and see’ approach with regard to expansions & relocations.
There are a number of sizeable transactions in legals although the leasing process has slowed considerably with prolonged periods from exclusivity to completion and closing being experienced at present. Approximately 6,000m² of office accommodation has been leased in the capital since the Covid-19 lockdown commenced.
The shutdown of non-essential construction sites and their ultimate re-opening on a phased basis will constrain the development pipeline, pushing out the delivery of some office projects by at least 3 months, insulating the market to some degree from the threat of oversupply, which would typically become a concern in a period of downturn such as this.
While enforced remote working over recent months might encourage some occupiers to consider their future office space requirements and we are likely to see increased incidences of employees working one or two days from home going forward, the reality is that office space will still be required. It is expected that density rates in offices will reduce to facilitate appropriate social distancing.
Most companies are now focussing on planning for a return to the workplace. The ‘new normal’ will require significant planning, particularly in terms of reconfiguration of work environments as well as considerations around enhanced cleaning and implementation of hands-free technology.
According to Marie Hunt, Head of Research at CBRE Ireland, “The Irish economy and its real estate market entered this crisis from a position of relative strength. Factors such as structural imbalances between supply and demand, Ireland's favourable demographics and Ireland's attractiveness as a destination for occupiers remain unchanged and will continue to prove supportive of investment in the Irish real estate sector post-Covid. Provided the outbreak is brought under control in a reasonable timeframe and we follow the trajectory witnessed in Asia, our house view at this juncture is for a rebound in activity in the Irish commercial real estate sector during the second half of 2020, led initially by the investment sector of the market where there is considerable investor equity in a position to deploy once assets are released for sale in due course. It will however take longer for occupational markets to rebound. The depth and duration of the pandemic will ultimately dictate the extent to which the real estate market is impacted, and it is clear that in every sector of the market, the ‘new normal’ will be a very different place indeed”.
