Construction activity in Dublin has reached boom levels again, but strong demand for office space has meant there’s no sign of over-capacity and rents are staying steady.

That’s according to a review of the first quarter from HWBC property consultants, which says that more than four million square feet of office space is being built right now in the capital.

“Demand from ‘Big Tech’ is growing quarter on quarter, and the market for prime office space continues to strengthen,” the report says. “Demand from co-working space providers has also been a significant component of tenant demand, with US firm WeWork accounting for a massive 15% of the market take up this year.”

The firm expects rents to rise as rent-free periods are reduced or disappear: “Grade A CBD office rents were steady at €65 per square foot by the middle of the year, however many headline rents are based on generous rent-free periods of up to 12 months. HWBC expects these tenant incentives to reduce over the next 12 months as occupier demand continues to be strong.”

Spillover

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HWBC also expects a spillover from city centre to outer urban locations under the pressure of rising rents and demand: “Grade A suburban rents were also steady at €30 per sq. ft. Competition for space in the city centre means that many tenants are looking at suburban locations and the city fringe to fulfil large space requirements.”

As with other analysts, HWBC points up the growing problem of lack of affordable accommodation for all the workers who will fill these buildings daily. 

It says: “A major concern is the lack of affordable rental accommodation for the thousands of workers being hired for new jobs created by multi-nationals investing in Ireland. Some large occupiers have looked to combine office and staff needs in the same location — JP Morgan and Google have purchased office buildings at Capital Dock and Boland’s Quay respectively, with substantial apartment complexes on the same site.”

Managing director Tony Waters said: “The fact that construction levels are at boom time levels might ring the over-supply alarm bells if the continuing occupier demand in the Dublin office market wasn’t so strong. Over 70% of the space due for completion this year is already pre-committed to tenants. 

“With a robust demand pipeline and well targeted development locations, this construction cycle is very different from the previous speculative boom.

The market has been underpinned by the continuing demand from ‘Big Tech’, with companies like Facebook, Amazon and Salesforce all in expansion mode.”

Brexit-related demand has been good, but is not a key driver in the market right now, the report concludes, partly due to difficulties with relocating here. “Better infrastructure and connectivity in other European cities, and the difficult residential market, are amongst the reasons why some companies have not included Dublin in their Brexit contingency planning,” it says.

Photo: The Sharp Building at 10-12 Hogan Place, Dublin 2, recently let by HWBC