DUBLIN OFFICE MARKET OVERVIEW Q1 2018 - RESEARCH - Knight Frank
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RESEARCH DUBLIN OFFICE MARKET OVERVIEW Q1 2018 OCCUPIER TRENDS INVESTMENT TRENDS MARKET OUTLOOK
DUBLIN OFFICE MARKET OVERVIEW Q1 2018 RESEARCH
SUMMARY Q1 OVERVIEW FIGURE 3
Standardised unemployment rate
FIGURE 4
Office take-up sq ft
747,835
Supported by a favourable economic backdrop, 16% 4,000,000
1. A range of economic the record level of occupier demand witnessed in 14% 3,500,000
indicators make for a bright
economic outlook 2017 showed no sign of abating in Q1 as the market
SQ FT
12% 3,000,000
continues to expand at a fast clip. 10% 2,500,000
2. 747,835 sq ft transacted in Q1,
making it the strongest first 8%
Economy of space transacted in Q1
multinationals foreign profits – is also 2,000,000
quarter recorded this cycle projected to grow by 5.6% this year, also 6% 1,500,000
The Department of Finance’s recently slightly down from the 6.6% recorded last
published Stability Programme Update 4%
3. Prime Grade A rents remain year. Another measure is underlying 1,000,000
stable at €62.50 psf 2018 is forecasting real GDP growth domestic demand, which captures the 2% 50,0000
of 5.6% this year, which would represent trends in the domestic economy. This is
a very strong level of growth albeit lower forecast to rise by 3.9% in 2018, up 0 0
4. 346,000 sq ft of new office space
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Q1 2018
than the 7.8% recorded in 2017. While significantly from the 2.6% recorded in 2017.
was delivered as a number of FIGURE 5
GDP is the international benchmark for
landmark buildings reached Underlying domestic demand is closely
Take-up by sector
comparing economies across the world, Source: Central Statistics Office Source: Knight Frank Research
practical completion related to trends in the labour market, with
it is useful to examine some alternative
measures of economic activity due to the the Department forecasting growth of 8%
5. Asian buyers accounted for the distorting effect foreign multinationals 2.7% in employment in 2018, close to the and bring total employment to 2.254 36% and 22% respectively. However, the
largest source of capital for the have in the Irish case. One such measure 2.9% recorded last year. This growth rate
first time, comprising 46% of is GNP – which removes the profits of would represent the addition of 60,000
million – surpassing the previous peak of most noteworthy feature of the market
20%
2.252 million achieved in 2007. was the continued emergence of the
the market foreign multinationals and adds in Irish new jobs in Ireland by the end of the year Coworking sector which accounted for 36%
Taking a longer term view of employment
growth also paints an encouraging 20% of space let. Following on from the
105,697 sq ft let in Q4, WeWork took
picture. A recent paper produced by the
a further 99,500 sq ft in Q1, this time
5%
ESRI predicted that there will be
KNIGHT FRANK VIEW ON RISK 2.673 million people employed in the establishing a presence on the north
State by 2040 – an increase of 33% in docklands at No. 2 Dublin Landings.
22% 9%
The trend towards full employment CSO allays those concerns by showing comparison to 2016. Dublin is expected The other significant Coworking deal
FIGURE 2
will inevitably lead to concerns that that nominal unit labour costs – which to experience employment growth in the was Hibernia REIT’s letting of 77 Sir
Labour productivity
wage inflation pressures will emerge measure employee compensation order of 28%, with those at work rising to John Rogerson’s Quay to International TMT STATE
PROFESSIONAL SERVICES COWORKING
to hurt Ireland’s competitive position relative to productivity – have been 350 795,000. In summary, the range of Workplace Group (formerly Regus), a
INFORMATION AND COMMUNICATION FINANCE OTHER
and its attractiveness as an office falling consistently over the last number OVERALL alternative measures available point to a building which Hibernia acquired on a
location. However, recent data from the of years. While employee compensation 300
strong economic outlook. vacant possession basis in Q1. Source: Knight Frank Research
growth turned positive between 2011 and
250
FIGURE 1 2016, this has been more than offset by
Nominal unit labour costs labour productivity gains over the period. 200 Occupier market Deal size analysis
Overall, nominal unit labour costs have
fallen by 32% between 2008 and 2016. 150 The Dublin office market witnessed its
160 Total size Number Share by number Sq ft Share by
strongest opening quarter this cycle as of deals of deals deal size
140 This contrasts with the situation 100
747,835 sq ft of office space transacted
between 2000 and 2008 which saw in Q1 – an increase of 58% on the Up to 5,000 sq ft 35 54% 84,336 11%
120
costs rise by 38% as compensation 50
same period last year. In total, 65 deals
100 outstripped productivity growth and
0 transacted with an average deal size of 5,000 - 9,999 sq ft 8 12% 52,557 7%
severely eroded Ireland’s competitive
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
80 11,505 sq ft. Delving further into deal
position. Furthermore, examining
Source: Central Statistics Office size, we see that deals under 5,000 sq ft 10,000 - 19,999 sq ft 10 15% 146,170 20%
60 productivity gains on a sectoral basis
accounted for 54% of deals transacted
shows that the Technology, Media and
40 but just 11% of space let, while deals in 20,000 - 49,999 sq ft 10 15% 312,347 42%
Telecommunications (TMT) industry lower than they were that year. With
excess of 50,000 sq ft accounted for
20 (as proxied by the CSO’s category the TMT sector typically accounting
of Information and Communication) for 40-50% of Dublin office take-up, 3% of deals transacted but 20% of 50,000 sq ft plus 2 3% 152,425 20%
0 space let.
witnessed labour productivity growth the data suggests that this important
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2.5X that of the average since 2000, sector is performing particularly well Total 65 100% 747,835 100%
Demand was mainly driven by the TMT
Source: Central Statistics Office leaving nominal unit labour costs 41% from a labour market perspective. and Finance sectors which accounted Source: Knight Frank Research
for the largest proportion of activity with Due to rounding, percentages may not add up to 100%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2 3
DUBLIN OFFICE MARKET OVERVIEW Q1 2018 RESEARCH
PO
DUBLIN CENTRAL CITY CORE
RT
LA
KEY
ND
Block 5, Irish Life Centre
RO
Rent: €45.00 psf
Take-up: 15,000 sq ft
Block 5, Irish Life Centre LETTINGS
W
Rent: €45.00 psf
Tenant: Apex Fund Services Take-up: 19,700 sq ft
INVESTMENTS
Sector: Finance Tenant: Depfa Bank DEVELOPMENTS
Sector: Finance
CONNOLLY SDZ BOUNDARY
TRAIN STATION DART RAIL LINE
LUAS TRAM LINE
LUAS TRAM LINE
2 Dockland Central
O‘C O
ET
Rent: €52.50 psf
Take-up: 12,979 sq ft No.2 Dublin Landings
TRE
N N EL
Tenant: Hubspot SHERIFF ST Rent: €50.00 psf
REET UPPE
SS
Sector: TMT Take-up: 99,500 sq ft
R Tenant: WeWork
L STR
IEN
Sector: Coworking
the
AM
D
EET
convention
E WALL ROA
1GQ centre
AY Rent: €60.00 psf
N QU 3ARENA
ED E Take-up: 25,241 sq ft
Tenant: CDB Aviation
ES QUAY
ORG
Sector: Finance
G E No.1 Dublin Landings
Y Yield: 3.94%
N QUA CIT Y QUA Price: €164,000,000 No.1 Dublin Landings
A STO Y Purchaser: Triuva Type: Development
Owner: Triuva
Ballast House Space Delivered: 143,967 sq ft
Type: Refurbishment TRINITY
Owner: Irish Life GRAND CANAL
COLLEGE 1WML ENERGY THEATRE
Space Delivered: 16,000 sq ft
NORTH DUBLIN Rent: €57.00 psf
SUBURBS Take-up: 48,484 sq ft
Chattam & King Street Tenant: Autodesk
77 Sir John Rogerson’s Quay
Rent: €58.00 psf Rent: €50.00 psf
Sector: TMT
Take-up: 26,167 sq ft Take-up: 34,400 sq ft
PEARS Tenant: IWG
Tenant: Qualtrics E STRE
Sector: TMT Trinity Point ET Sector: Coworking
ET
Rent: €56.66 psf
ST
N STRE
GRAFTON Take-up: 21,108 sq ft
ARE
STREET Tenant: OPW
Sector: State
KILD
GR
DAWSO
AN
GOVERNMENT D
MO CA
BUILDINGS MERRION UN N AL
CORE SQUARE TS ST
WEST DUBLIN BAY TR LO
SUBURBS EE W
ST STEPHEN’S TL ER
GREEN OW
10 Molesworth St ER
UE
CUFFE ST One Molesworth St Type: Redevelopment
Two Haddington Buildings BATH AVEN
Rent: €70.00 psf Owner: IPUT
Space Delivered: 115,000 sq ft Yield: 5.40%
Take-up: 10,222 sq ft
Price: €24,000,000
Tenant: TD Securities
Purchaser: Quadoro Doric
BA
R
Sector: Finance
PE
GG
SOUTH D
NR
UP
OT
LE
SUBURBS One Molesworth St O
GT AVIVA STADIUM
ST
ES
IN
ST
Type: Redevelopment D
NO
CAMDEN STREET L
LO
AD
ON
Owner: Green REIT H
IAM
WE
RTH
Space Delivered: 71,159 sq ft
ST
SHELB
R
ILL
HATCH STR R
U
EET L OWE
LO
ZW
MB
WE
E ROAD
FIT
OURNE ROA D
ER L
LinkedIn HQ Site
R
Grand Canal/Fitzwilliam Sq
AND
Three Park Place 100,000 sq ft
Floorspace:
CH
Rent: N/A Delivery date: Feb 2017
ILL
RO
OWER
AR
Take-up: 21,198 sq ft
NV
Tenant: CNP Santandar
AD
LE
O
Sector: Finance IT
M
ON
TR
T
Three Park Place
ST
Rent: N/A
RA
Take-up: 31,300 sq ft
Tenant: Deloitte
NE
Sector: Professional Services
LA G
L EE
SO
H RO
Note: All areas and delivery times noted above are approximate estimates only and subject to change
N
ST
4 UP 5
AD
PEDUBLIN OFFICE MARKET OVERVIEW Q1 2018 RESEARCH
2016, the revitalisation of Molesworth 88% or €440.2 million of the total office 46% market share followed by Europe
FIGURE 6
Top 5 office leasing transactions Street finally came to fruition in Q1 investment spend. with 44% and Irish investors with 10% of
Take-up by location
with the completion of Green REIT’s the market. Asian capital also played a
Property Tenant Sector Size The largest transaction of the quarter saw
2% (sq ft)
One Molesworth Street and IPUT’s 10
Molesworth Street which consist of
Northwood Investors sell 1 and 2 Hueston
significant role on the disposal side, with
WEST SUBURBS
1% No.2 Dublin Landings, Dublin 1 WeWork Coworking 99,500
71,159 sq ft and 115,000 sq ft of office
South Quarter to Hong Kong investors CK Singapore’s Oxley Holdings and their
joint venture partner Ballymore selling the
NORTH SUBURBS Properties – a company controlled by CK
The Chase, Sandyford, Dublin 18 Google TMT 52,925 space respectively. newly completed No.1 Dublin Landings to
Hutchison Holdings – for €176.0 million.
SOUTH The Blackthorn Building, Sandyford, Dublin 18 Google TMT 48,522 Turning to new commencements, The two inter-connected office blocks are Triuva for €164.0 million. The building had
SUBURBS been fully let to the NTMA with 15 years
contractors have started on site at the let to Eir until 2033 and extend to a total
26% 1WML, Dublin 2 AutoDesk TMT 48,484
ESB headquarters on Fitzwilliam Street. of 218,143 sq ft. Asian investors were term certain and the income representing
77, Sir John Rogerson's Quay, Dublin 2 IWG Coworking 34,400 The ESB will take 145,312 sq ft at also active in Sandyford, with Singapore a 3.94% net initial yield to the German
FRINGE Fitzwilliam 27 while a further 134,548 investment company Blacktree acquiring institutional investor. Deals involving
Source: Knight Frank Research
5% sq ft at Fitzwilliam 28 will be available to Whelan House and Accenture House newly completed and let office schemes
let on the open market. Activity has also for €22.3 million. These two acquisitions are expected to play an important role
Hibernia also let space in their 1WML Prime Grade A rents remained stable at
begun on the former Tedcastles Site at saw Asian buyers account for the largest in supporting investment volumes as
CITY CENTRE scheme, with Autodesk taking 48,484 €62.50 psf.
66% sq ft meaning that 96% of the scheme 91-94 North Wall Quay where TIO are source of capital for the first time with 2018 progresses.
is now let. Also in the City Centre,
Deloitte have taken 31,300 sq ft at
Development constructing an eight storey office building
which will extend to 201,059 sq ft. FIGURE 9 FIGURE 10
Source: Knight Frank Research
Clancourt’s Three Park Place while market Dublin prime office yields Buyer and vendor source
CNP Santandar have taken 21,198 sq
ft at the same scheme. Overall, the City
346,000 sq ft was delivered in Q1 as a Investments 8% US ASIA EUROPE IRELAND UK
number of buildings reached practical
Centre accounted for 66% of the market, €932.9 million worth of investment
FIGURE 7
followed by the South Suburbs with completion. The largest of these 7%
Dublin prime office rents transactions changed hands during
26% and the Fringe with 5%. Google was Ballymore Oxley’s No.1 Dublin BUYERS
€ per sq ft per annum Q1, more than double the amount that 6%
were the key driver of the activity in the Landings which comprises 143,967
was recorded during the same period
€70 South Suburbs, taking 52,925 sq ft at The sq ft of office space and represents
last year. Volumes were supported by a 5%
Chase and 48,522 sq ft at The Blackthorn the first of five office buildings that will
number of large lot-sized transactions
€60 Building – both of which are located in be completed as part of the Dublin 4% VENDORS
with four deals in excess of €50.0
Sandyford. Accenture were also active in Landings scheme. Meanwhile, following
€50
million completing compared to just
the delivery of 40 Molesworth Street 3%
the South Suburbs taking 31,019 sq ft at one during the same period last year.
Building 11, Cherrywood Office Park. in 2017 and 32 Molesworth Street in Office investment sales accounted
€40 2%
for the largest proportion of activity,
€30 commanding 55% of the market or 1%
€502.6 million. Activity remained focused
€20 on Dublin with the capital attracting 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Q1 2018
€10
Source: Knight Frank Research Source: Knight Frank Research
FIGURE 8
€0 Irish commercial investment
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Q1 2018
volumes € million
Top 5 office investment transactions
Source: Knight Frank Research 5,000
Property Seller Buyer Approx
price
4,000 1 and 2 Heuston South Quarter, Northwood
CK Properties €175.0
Dublin 8 Investors
3,000 No. 1 Dublin Landings, Ballymore/
Triuva €164.0
Dublin 1 Oxley
2,000 Two Haddington Buildings, Quadoro
Alykes Ltd €24.0
Dublin 4 Doric
1,000 Whelan House and Accenture House,
Philips Blacktree €22.3
South County Business Park, Dublin 18
0
Newenham House, Northern Cross, Collen
€17.2
2006
Q1 2018
2005
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Private Irish
Dublin 17 Construction
10 Molesworth Street
Source: Knight Frank Research Source: Knight Frank Research
6 7RESEARCH
John Ring, Head of Research
+353 1 634 2466
john.ring@ie.knightfrank.com
Robert O’Connor, Research Analyst
+353 1 634 2466
robert.oconnor@ie.knightfrank.com
CAPITAL MARKETS
Adrian Trueick, Director
+353 1 634 2466
adrian.trueick@ie.knightfrank.com
Peter Flanagan, Director
+353 1 634 2466
peter.flanagan@ie.knightfrank.com
Ross Fogarty, Director
+353 1 634 2466
ross.fogarty@ie.knightfrank.com
OFFICES
Declan O’Reilly, Director
+353 1 634 2466
declan.oreilly@ie.knightfrank.com
Paul Hanly, Director
+353 1 634 2466
paul.hanly@ie.knightfrank.com
Jim O’Reilly, Director
+353 1 634 2466
jim.oreilly@ie.knightfrank.com
Gavin Maguire, Associate Director
+353 1 634 2466
gavin.maguire@ie.knightfrank.com
Mark Headon, Associate Director
+353 1 634 2466
mark.headon@ie.knightfrank.com
David Reddy, Associate Director
+353 1 634 2466
david.reddy@ie.knightfrank.com
© HT Meagher O’Reilly trading as Knight Frank
This report is published for general information only and not to
be relied upon in any way. Although high standards have been
used in the preparation of the information, analysis, views
and projections presented in this report, no responsibility or
RECENT MARKET-LEADING RESEARCH PUBLICATIONS liability whatsoever can be accepted by HT Meagher O’Reilly
trading as Knight Frank for any loss or damage resultant
from any use of, reliance on or reference to the contents
RESEARCH RESEARCH
of this document. As a general report, this material does
INVESTMENT INSIGHT
INDUSTRIAL MARKET INSIGHT Q1 2018 INVESTMENT INSIGHT Q1 2018
The economic fundamentals €932.9 million worth of investment to CK Properties, a company controlled
FIGURE 3
by CK Hutchinson Holdings, for €176.0
not necessarily represent the view of HT Meagher O’Reilly
underpinning the industrial and logistics transactions changed hands during Q1, Investment spend by sector
market remained strong during Q1, more than double the amount that was million. Investment spend in the office
supporting occupier demand. Following recorded in Q1 last year. Volumes were sector in 2018 is anticipated to be
on from a record setting year for exports supported by a number of large lot-sized supported by the completion of new
office buildings which will see developers
4% 3% 2% Industrial
in 2017, January saw the highest ever transactions with four deals in excess STUDENT
ACCOMMODATION
RETAIL
INDUSTRIAL
monthly level for outbound trade as €12.4 of €50.0 million compared to just one and their investment partners seek to
billion worth of goods were exported during the same period of last year. In the exit their positions once the buildings Retail
trading as Knight Frank in relation to particular properties
(on a seasonally adjusted basis), which context of the quantum of large deals that have been let. An early example of
this in Q1 was Triuva’s purchase of the
represented a 15% increase on the same are likely to be brought to the market this
NTMA tenanted No.1 Dublin Landings for 14% Student Accommodation
THE 2018 REPORT month last year. While exports fell back year, we anticipate that volumes in 2018 MULTI-
FAMILY
to €10.9 billion in February, exports were will slightly exceed what was achieved in €164.0 million from joint venture partners
still 6.5% ahead of the same period last 2017, reaching approximately €2.5 billion. Ballymore and Oxley. 55%
OFFICE
Multi Family
year putting 2018 on a good footing to
or projects. Reproduction of this report in whole or in part
exceed the 2017 record.
Mountpark Baldonnell which Knight Frank brought to the market in Q1.
21%
MIXED-USE
Mixed-Use
FIGURE 1 FIGURE 2
67,899 sq m of take-up transacted in Irish commercial investment volumes Investment spend by location
Dublin in Q1 in what was a strong start € million Office
to the year. This figure represents a 23% FIGURE 2 FIGURE 3
2500
increase on the volume of activity that Take-up by location Deal size share of market in sq m
was recorded during the same quarter of
is not allowed without prior written approval of HT Meagher
Source: Knight Frank Research
last year. Of this, lettings accounted for NORTHERN
6%
2000 IRELAND
North East 10,001+
61% while 39% was comprised of sales.You can also read
