A tenant's market in the office sector, but not forever – CBRE

The office vacancy rate has gone up over the last twelve months and could rise further, creating what is a market for tenants in the current environment.

According to Marie Hunt, Executive Director and Head of Research with property consultants CBRE, firms have been offloading excess accommodation since the onset of the pandemic.

“The vacancy rate has gone up and might go up a little bit further. It’s currently at 9.6%. It will probably go over 10%, but it will be nothing as dramatic as the increase in vacancy that we saw after the Great Financial Crisis,” she explained.

Ms Hunt said that was manifesting in a softening of rents and better terms for those companies looking to take up office space.

“What has changed is that it’s a tenant’s market in terms of the length of the lease, the break options and the incentives that you will get when signing a lease.”

However, she said the situation was unlikely to last.

“That will probably change very dramatically once the market reverts so there is a window of opportunity for anyone looking to sign a lease today because landlords will give a better deal,” Ms Hunt said.

She pointed to the fact that although some banks, in particular, have been offloading office space, technology and professional services companies were looking for additional floor space.

There has also been the hiatus in construction over the past number of months due to level 5 Covid-19 restrictions, which are being fully lifted across the sector from today.

That followed another period of lockdown last year.

“If you look at what was meant to have been delivered in new office space in 2020, only about 56% of it got built and the rest has fallen into 2021.

“Some of that stock will fall into 2022. In tandem with a slowdown in activity we’ve also had a slowdown in development, so one has matched the other.”

AIB recently confirmed that it was vacating three of its six office sites in Dublin City Centre and announced a hybrid working plan that would see some staff working from home up to three days a week.

Bank of Ireland also said it was leaving its Mespil Road headquarters as it looks to further reduce its office space in the city.