AS a country, our employment landscape continues to evolve in line with global trends, with the move from rural to urban locations now the dominant feature of the market.
Dublin has been the main benefactor of urbanisation in the Irish market, and with forecasted office take-up between 2.7m to 3m sq ft in 2018 and over 4.4m sq ft under construction across the 42 separate schemes, the momentum is due to continue.
This trend to urbanisation has been slower in Ireland’s regional cities; however, there has certainly been more signs of it in the last 18 months, with Cork the city where it is most apparent. Indeed the office market looks likely to be the most active commercial development sector, along with hotels and student accommodation over the next number of years. The Cushman & Wakefield Office Research for Cork shows a take-up of 8,150 sq m for the third quarter of 2018, bringing the yearly total up 43,750 sq m for the year so far, in over 50 separate deals.
The three biggest deals this quarter were Voxpro, who have taken 3,450 sq m in City Gate Park; Dornan Engineering, 2,000 sq m in EastGate; and UTRC (United Technologies Research Centre) taking 1,400 sq m in Penrose Wharf.
It is important to note that a large chunk of year-to-date take-up comprises the expansion by Apple in its Hollyhill campus. However, the volume of transactions remains very robust and was above the yearly average.
At this stage, it is likely 2018 will be a record year in terms of take-up in the Cork market, likely to break 50,000 sq m.
Office availability over the same period had declined, and with a current vacancy rate at 7.2% levels, this would be considered the market equilibrium vacancy rate.
Furthermore, when signed and reserved space is accounted for, the net vacancy level is as low as 5.5%, well below what is considered market equilibrium. This causes a difficulty in the Cork market as any new entries will find it difficult to locate here until some of the new schemes are advanced significantly. In fact, the availability of even temporary set-down space is difficult to locate in the present environment, and it is important that this is addressed.
The volume of office space under construction up to the end of September remained stable at 21,800 sq m, at three locations; 85 South Mall, Block A Navi gation Square and the Lilly building in EastGate. Some 87% of this space is already pre-let with only 2,800 sq m not spoken for formally. KPMG and Forcepoint will occupy 85 South Mall and Clearstream have leased the majority of Navigation Square, while Lilly will occupy the entire building in EastGate, bringing their occupancy to over 12,550 sq m.
On a positive note, progress has been made in the last month with construction commencing on a number of substantial schemes, with O’Callaghan Properties commencing Block B Navigation Square, the Clarendon/BAM consortium going on site at Horgan’s Quay, O’Flynn Construction commencing works in Westfield Office Campus, Ballincollig and John Cleary Developments undertaking demolition and site clearance works at Penrose Dock with construction now underway. These four schemes are capable of delivering over 70,000 sq m (750,000 sq ft) of office space over the next three years, which sends a positive message to the market.
With other ‘City Centre’ planning either already in place or in the planning system, there are plans for an additional 125,000 sq m of space, including the recently publicised 15-storey Prism Building on Clontarf Street, Trinity Quarter, Camden Quay, Sullivan’s Quay, Beamish & Crawford site and Custom House Quay, where plans are being finalised for a major mixed-use scheme, with an application due early in 2019. Some of these are unlikely to be built unless demand levels far outweigh the historic average. But it is encouraging for the city that developers have the confidence to go on site and that the quality of the space being provided is at a high level, improving the overall office stock.
What is plainly evident in the market is that corporate occupiers, who are highly focused on talent acquisition and retention, are choosing the Grade A space in the best locations.
This is even more evident in the new builds, where the occupiers and corporate markets are influencing the design of modern office accommodation with much more planning going into interior design, technology and occupier amenities.
The fight for talent is the most acute change in the employment market and it has been shown that productivity levels increase significantly where design and technology are to the front of corporate occupiers in terms of their accommodation.
The office market has certainly been a robust one in 2018 and we in Cushman & Wakefield see this continuing over the next number of years. City centre rents rose 11% annually up to the end of September and at €350 per sq m they are now back to previous peak levels. These are likely to remain stable for the remainder of the year but are predicted to rise towards €375 per sq m by the end of 2019.
Commenting on the market, Deirdre O’Reilly, senior economist with Cushman & Wakefield says “robust demand for office space in Cork, combined with falling supply has brought the market to a tipping point, whereby take-up is now exceeding the volume of available product for the first time in its current cycle.
While pipeline office development for Cork is strong, it is crucial now that this potential is realised, in order to avoid hampering future activity in the market.”
Peter O’Flynn is MD of Cushman & Wakefield Cork