Tech remains the best bet to provide tenants for Ireland’s prime offices despite a global wave of high-profile job cuts and spending reductions washing through the sector, according to estate agent Savills’ latest Dublin Office Market review.
In cash terms rents for top class offices are now back at Celtic Tiger levels, the report says.
Even allowing for recent job losses, employment in the sector is up 50pc over the past decade in large, well-funded, global companies including Meta and Google which have big Dublin sites, according to the report.
Even with recent job losses and a shift to more remote working, attendance in the office is still rising, especially from Tuesday to Thursday, the report says.
“It is arguably harder to select a sector, other than tech, to which an office market should be targeted towards in long-term given the long-term performance in market caps of tech relative to other sectors,” according to the report by Savills’ Director of Research, John Ring.
He sees the so-called ‘tech wreck’ being relatively short lived with the rise of artificial intelligence, wearable tech, medtech, fintech and robotics cited as evidence the sector can adapt and renew growth more quickly than others.
In the meantime, more traditional occupiers are likely to come to the fore, a trend already seen in last year’s biggest office deal – a contract for a new headquarters for Citi Group.
However, while rents are back at Celtic Tiger levels and tech firms are tipped for further growth, real income for property investors has declined.
“Prime rental levels now stand at €62.50 per sqft, which was the same as the previous peak in 2007. However, when adjusted for inflation to reflect real rental levels – which is what counts – rents are 14pc lower, or the equivalent of €53.50 per sqft (in 2007 terms)."
The cost of producing prime office space is up 45pc over the same period and higher construction costs as a result of the implementation of ESG standards will also feed into this dynamic, he said.
Environmental building standards are driving up costs but are also set to stimulate demand, including from the State sector where departments and agencies have been given a goal to reduce by 50pc their carbon output by 2030. This is likely to mean leasing, buying or refurbishing new, environmentally friendly offices, the report says.