Year of 'mega tech deal' for Dublin office space demand
2018 was the year of the "mega tech deal" in terms of demand for Dublin office space, HWBC's 2018 Dublin Office Market Review shows.
HWBC said that major lettings to Google, Facebook and LinkedIn helped boost the take up of new space by 8% to 3.85 million square feet in 2018.
This surpassed the previous year's record of 3.6 million square feet.
HWBC is forecasting that prime office rents in Dublin will remain at their current level of around €60 to €65 per square foot, a sign that the market is maturing.
It noted that lease terms are typically for 20 or 25 years on new or refurbished Grade A space with tenant break options generally available at the end of year 12 or 15.
Facebook's 823,000 square feet letting of the former AIB Bank Centre building in Ballsbridge in Dublin 4 was the biggest deal of the year.
The Top 10 also included lettings by Google at Boland's Quay and LinkedIn at One Wilton Place.
But HWBC said that while the level of demand for 100,000 square feet deals is a positive, it masks a weakening in demand for smaller lot sizes.
Space in the under 30,000 square feet range is slower to fill, reflecting a more cautious outlook from business in other sectors like finance, professional services and life sciences. The company said this caution may be Brexit related.
HWBC said the Dublin suburban office market is still in a growth phase, with rents expected to exceed €32 per square ft this year.
The surburan market has the potential to peak to around €35 per square feet in locations like Sandyford and Central Park, it added.
HWBC said that Brexit remains a continuing point of uncertainty in the market, potentially contributing to the weakening in demand for space from some domestic sources.
"Although over 50 companies have declared for Ireland as a post Brexit location, the UK leaving the EU has had limited positive impact to date on overseas demand for space in Dublin, with most requirements on the smaller scale or modest expansion of operations already here," it added.
"2018 was the year of the mega tech deal, and we're aware of several active requirements from tech companies in the market who are looking to take over 100,000 sq ft of space in 2019," commented Tony Waters, Managing Director of HWBC.
"Although this level of pre-letting demand is very positive for the office market and wider economy, it also somewhat masks activity on the ground where demand for smaller lot sizes is not as active.
"Overall that leads us to forecast that rents will remain steady at about €60 to €65 per square foot as we reach a more mature phase in the cycle, and one that gives greater clarity to occupiers, developers and investors on the costs and returns available," Mr Waters added.