Just half of the 202 new office building planned for Dublin over the next three years are likely to delivered on time, according to Savills.

The property advisory’s new report, entitled ‘Skyline Survey’, estimates that there is developer ambition for 12 million sq. ft. of new office accommodation by the end of 2021, with more than 2.5m sq. ft. of existing buildings either being refurbished or completely redeveloped as part of the process. This would be enough office space to accommodate 120,000 workers.

However, report authors Andrew Cunningham and Christopher Boyce point to a measured ‘slippage rate’ in the delivery of planned buildings.

For projects that are planned for delivery in two years and beyond, Savills analysis shows that more than 50% of development has been deferred over time, despite record recent take-up levels and demand for Dublin offices.

“Our analysis over time shows that significant slippage in delivery of the pipeline is very common, with developers tending to overestimate how much space will be delivered in the future,” said Boyce.

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“For example, the estimated new stock for delivery in 2019 has already fallen by 17% compared to the May 2017 figures. Furthermore, the volume of new stock in Dublin this year is 2.17 million sq. ft. – a 55% fall on what was estimated back in 2015.”

Some 4.5 million sq. ft. of office development across 46 schemes is currently under construction, and due to the continuing strong demand for Dublin offices, 57% of space delivering this year has already been signed up by tenants in advance of completion.

With demand for office space at a record high since the recession – currently at 4.1 million sq. ft. (up from 3.5m sq. ft. pre the Brexit vote) – expectations are that the remainder will be snapped up in a relatively short period of time.

According to Savills, 89% of demand includes the core CBD area of Dublin 2 in the search criteria. Demand is being driven by tech companies, serviced office operators and financial services.

Trendy Offices

With unemployment at a 10-year low of 5.9%, companies competing are using modern offices packed full of staff amenities as a carrot to attract the best young talent. Rents are a relatively small cost compared with wages, and the quality and location of the office space for workers is part of the offering to staff.

Gyms, kitchens, coffee bars, meditation and prayer facilities, bike racks, club style locker rooms, showers and drying rooms are all now standard features in the new wave of offices being built in the city.

The Savills report, looking further down the pipeline, shows that 85 buildings (6.5 million sq. ft.) have received a grant of planning permission but are not yet on site. It remains unclear when or even if these buildings will be built.

“Tighter purse strings and greater regulations in the banks and finance houses mean conventional senior debt from domestic banks for speculative development remains scarce, an undoubted cause of the slippage in delivery of new stock,” said Andrew Cunningham, head of offices at Savills Ireland.

“Development is being undertaken by those who are well funded, and while private equity has the largest share of the overall pipeline (51%), projects that are actually underway are more biased towards publicly quoted property companies, REITS and funds with large balance sheets.”

Elsewhere in the report, Savills notes the impact of ‘co-working’ on the office market. Take-up of space by serviced office providers – such as WeWork and Iconic – was less than 1% in 2015. However, in Q1 2018, this figure rose to 20%. According to Savills, this follows a trend emerging globally, and the growth is expected to continue with strong active demand in the market.

Photo: The planned Exchange building in Dublin's IFSC district