An urgent increase in the amount of commercial space being constructed - particularly in Dublin - is needed in order to meet demand, according to estate agents' Lisney, who publish their 2018 outlook today.
The outlook shows multinational tech firms continuing to dominate the market, with all but a small amount of the new space coming on stream already pre-let or reserved.
Paul Hipwell, Divisional Director with Lisney, said the company expects that Facebook and Google will hold 4% of the capital's office space this year and he predicts that the dominance of the multinationals will increase. He said that during 2015-2016, the technology sector would have accounted for about a third of Dublin's office take-up but when you look at the end of 2017, they accounted for 42% of office space. Technology firms are very active and are looking mainly at new space under construction, he added.
On the supply end of the office market, Mr Hipwell said that 2.3 million square feet of office space is under construction and - remarkably - 68% of that is already let or reserved. Those reserving the space are typically IT companies and typically North American IT companies. He said this situation is even more pronounced in the south docks area of Dublin with figures there suggesting that over three quarters of offices under construction are pre-let with the IT sector again the key driver.
Mr Hipwell said the company is seeing come concern amongst indigenous business about the rental rates in Dublin city centre - and not just for start-up companies. Some of these companies may have agreed five year rental reviews and locked into leases at the bottom of the market. If they want to stay in the city, he said the companies will have to pay the going market rate of €55-60 per square foot, which will clearly impact on their business. But he said he is not suggesting that companies will see a mass exodus to the suburbs as they clearly have other considerations to take into account, including staff retention.
On Brexit, Mr Hipwell said that Dublin has seen some wins, including Barclays and JP Morgan. But he said that Brexit is not a key driver of the Dublin office market as yet and while some companies have carried out due diligence in Dublin, they have also looked at other European cities including Paris and Amsterdam. Mr Hipwell said that many companies will leave their decisions to the last minute as they still do not fully understand what Brexit will mean. Lisney gets the sense, however, that companies are not moving en masse to other cities from London and they will just move departments or units here to preserve their euro trading licenses, he added.
MORNING BRIEFS - A separate report from CBRE says that Brexit has helped boost activity in the office market, with leasing activity from British firms doubling year on year. It says that there were €2.65 billion worth of property investments during 2017 - and predicts a similar figure this year. CBRE also anticipates a strong appetite for prime property opportunities in the Cork this year across a range of sectors.
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