Less than half of 202 planned offices in Dublin over the next three years are expected to be delivered according to a new survey.
The ‘Skyline Survey’ from Savills Ireland estimates there is developer ambition for 12 million sq. ft. of new office accommodation by the end of 2021, with over 2.5m sq. ft. of existing buildings either being refurbished or completely redeveloped, enough to accommodate 120,000 workers.
However, a measured ‘slippage rate’ in the delivery of planned buildings has been found by the authors of the report, Andrew Cunningham and Christopher Boyce.
For projects that are planned for delivery in two years and beyond, their analysis shows that over 50% of development has been deferred over time, despite record recent take-up levels and demand for Dublin offices.
Mr Boyce said:
“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.
“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.”
At present, 4.5 million sq. ft. of office development across 46 schemes is under construction and due to the continuing strong demand for offices, 57% of space delivering this year has already been signed up by tenants in advance of completion.
Savills analysis shows demand is from across sectors and industries, but there is a clear focus on the prime locations. 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 who are all vying for the best new buildings in the most sought after areas.
Looking further down the pipeline, 85 buildings (6.5 million sq. ft.) have received a grant of planning permission, but are not yet on site and it remains unclear when or indeed if these buildings will be built.
Mr Cunningham said:
“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.
“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 under way are more biased towards publicly quote prop-cos, REITS and funds with large balance sheets.”