The number of commercial property deals done in the second quarter more than doubled, but the impact of the Covid-19 lockdown and concerns about the future of the office were still evident, according to CBRE Ireland.
CBRE, a commercial property specialist, on Friday published figures for the volume of office leasing activity completed in Dublin in the second quarter of the year.
It was a significantly better performance than in the previous quarter, with 33 transactions signed, compared with only 13 in the first quarter.
Lettings totalling 18,630sq m were signed, bringing total take-up in the first half of 2021 to 22,382sq m.
“However, in the context of the volumes of take-up seen in the market in recent years, the impact that the Covid-19 lockdown and concerns about the future of the office has had on occupier decision-making is evident,” the company said.
Catalyst
CBRE head of research Marie Hunt the gradual easing of lockdown measures in recent weeks “has been the catalyst” for renewed activity in the commercial property market.
“This is something that is in evidence in the office sector with further strengthening in occupier demand quarter on quarter,” she said.
“Demand is now running at close to 300,000sq m – up almost one-third in the last six months alone. However, occupiers are under no immediate pressure to make location or expansion decisions.
“The reality is that until such time as the majority of office workers are back in their offices, occupiers will not be in a position to gauge the extent to which hybrid working will impact their real-estate requirements going forward.
“In addition, many occupiers are not in a position to travel to inspect buildings in the current environment.”
Alan Moran, executive director in the office team at CBRE, said: “With several office deals in legals, there is some visibility on the volume of leasing activity expected to complete in the second half of the year.
“However, with travel restrictions still in operation, the reality is that there will be a lag before many current enquiries translate into completed leasing deals in due course. We can therefore expect a few more quarters of below-par performance in the interim.
“Encouragingly, the overall rate of vacancy is showing signs of stabilising with much of the better grey space – particularly fitted accommodation – attracting interest and likely to lease up relatively quickly.”
According to CBRE, prime headline office rents in Dublin are currently in the order of €618.70 per square metre having declined 11.5 per cent from peak to trough in this cycle.
The property consultants believe rents will bottom out at this level with rental inflation on the horizon again from 2022 onwards.
Prime office yields, meanwhile, are currently stable at 4 per cent but with a number of office investments currently being offered for sale, it “remains to be seen if yields for core product will tighten over the coming months”.
