Co-working market in Dublin ranks among Europe's hottest
Dublin's co-working office market has been ranked fourth hottest among European cities in a league compiled by agents Cushman & Wakefield.
London, Paris and Stockholm are the top three co-working hot spots out of 40 cities analysed.
The findings are underscored by a recent Savills report which noted that flexible office space take-up surged by 118pc in Dublin for 2018, whereas traditional office space take-up grew by 25pc.
Coincidentally, in what seems like landlords learning from the co-working trends, a US property investment fund is planning to launch a new concept in serviced offices. CBRE Global Investors is preparing to roll out what it calls A&B, an 'above and beyond' landlord service in its US office portfolio.
The Cushman & Wakefield report says that Dublin's city dynamics profile is strong across all co-working factors. "Its size, internet speed and R&D scores are slightly below the European average, but all other factors are superior and combine to highlight Dublin's potential as a co-working market," it adds.
It attributes Dublin's performance mainly to the scale of many of the global corporates which have established headquarters in the city and this has "fed a high-growth ecosystem of skilled labour and auxiliary start-ups, especially in fintech".
Its report also points out that while global co-working operators have a presence in Dublin, there have been few domestic operators of note. "Dublin should be a simple market for operators to crack. Users that baulk at high rents and long leases would look to co-working as a cost-effective choice," it adds.
Ronan Corbett, head of office agency, Cushman & Wakefield Ireland, said: "We are seeing indications that the corporate occupier requirements are changing in Dublin in line with many European cities. The demand for a break from the traditional real estate model reflects the ongoing changes and trends in the modern workplace to merge technology and attract talent.
"Co-working and other forms of 'on-demand space' are expected to increase to facilitate real estate flexibility, spaceless growth and access to dispersed talent networks and open source innovation."
Referring to the way in which long leases are contributing to the growth in requirements for 'on-demand space', C&W's report indicates that one of the key reasons why London has the largest co-working market in Europe is because it has one of the longest standard office leases.
"In the UK, office leases typically last 10 years which can be a major financial commitment to occupiers. In contrast, leases in most continental European countries are only three to five years long, sometimes with the option to extend for another three to five years. In Dublin they average about seven years."
Such long leases do not suit either start-up businesses or those overseas companies when they are establishing a bridge head or testing the waters in a new market. In the fast moving high tech sector, these companies do not want to risk leases which tie them into paying rents for several years on premises which may not suit them within a few years.
The hot spot index was compiled by assessing cities on the basis of scale, business environment, people and catalyst. Even in a city with scale, the right business environment and talented people needs a catalyst for co-working growth. The number of start-ups and accelerators - offering finance and business administrative support to start-ups - is a great indicator of a city's dynamism. On that basis, while Dublin scored a creditable 132 points, it was well below 183 for London.
Another factor is collaboration. In the information technology (ICT) sector, collaboration has been a key driver of innovation across Europe, and ICT professionals make up one of the largest groups of co-working users. Stockholm ranks first in Europe in terms of collaboration, which is consistent with its tech cluster status, while Dublin ranks fifth.
Cushman & Wakefield currently tracks 11 million square metres of co-working space, serviced offices and flexible workspace, providing a critical insight into the sector. London is the most active city with the largest total co-working stock in Europe with 1.1 million sq m, accounting for 4.6pc of the overall office market.
However, questions are also being raised at the growing share of Dublin's office market being acquired through leasing agreements by US flexible workspace provider WeWork.
WeWork is estimated to have taken leases on about 8pc of all office space taken up in Dublin in 2018, including space at the Central Plaza on Dame Street.
It has also signed up to take the 9,300 sq m (100,105 sq ft) at Dublin Landings 2 building in Dublin's north docklands at an initial rent of €4.87m per annum or €540 per sq m.
Colm Lauder of Goodbody stockbrokers points out that WeWork is spending heavily to rapidly expand.
"It is often one of the most aggressive bidders paying keen headline rents across several notable lettings in London and Dublin over the last year. Nonetheless, the flexible space segment continues to grow with a transformative impact on the office market," he adds.
But Kate Ryan, head of research at BNP Paribas Real Estate in Ireland, says the first quarter of this year showed that demand for small traditional style lettings was also strong in Dublin.
"More than 60pc of all lettings in Q1 were for floor areas of less than 500 sq m (5,382 sq ft) which somewhat dispels concerns that the serviced office market has hampered the market for lettings at this end of the scale," she adds.
She also found that the role of the serviced office sector is notable among Brexit movers including Chaucer, DLA Piper, Baillie Gifford and Hermes Investment Management, operating out of serviced offices across the city.
"This is a trend that is likely to continue, with many companies opting to take flexible office space to set up their Irish operations before committing to a longer lease," she says.