Expectations for the Office Market in 2021

The latest CBRE Market Outlook report issued this week and it is fair to say, on the whole, is it broadly more positive than the Mitchell McDermott report referenced here last week. There is some great information on the current Dublin office marketplace, with insights on trends around occupier behaviours and priorities when guiding their employees’ return to the workplace. It won’t surprise anyone here to learn that touchless technologies and indoor air quality sensors are topping the list of smart building tech adoptions right now. In terms of investment, one of the lasting legacies of the global pandemic will likely be an increased demand for flexibility. This flexibility refers to both the physical space – need for adaptability of the office building interior – and the need for flexibility in the leases agreed between landlords and tenants. As most business owners are already starting to realise, occupiers will have to reconsider the configuration of their buildings and really question how efficiently accommodation is being used. New safety protocols, the ongoing need for social distancing, the ever-increasing number of staff likely to be working remotely and the very real need for a creative, collaboration space will inevitably feed into these changes. Looking ahead, the CBRE report anticipates a sizable pickup in office leasing activity from the second half of 2021 as economic activity improves and several postponed mandates are reignited. 

In relation to the development land market, the above report forecasts that house builders and residential developers – excluding BTR developers – are shifting their focus to the commuter counties and the Midlands region. One of the key insights from CBRE is that residential will continue to dominate development activities for the rest of 2021 and beyond. Significantly, the property agency expects to see “sizable land banks” in and around the Greater Dublin Area being brought to the market throughout 2021, which might be of interest to people here. 
Other trends identified in the report relate to the multi-family sector, which is experiencing strong demand for existing or standing stock. Also, more developers are applying for planning permission and developing schemes in fringe locations, which will be an interesting trend to watch as BTR – a relatively new asset class for the Irish market – evolves and expands outside of Dublin. 

Finally, the report confirmed that the industrial and logistics sector “continues to flourish”. Vacancy rates reached all-time lows of below 2 percent during 2020, which actually boosted rented growth. While the prospects for core property remain positive, thinner demand for secondary products are likely to continue to impact on pricing over the next 12 months. Also, landlords should expect to see shorter lease lengths being sought, together with more flexibility, and earlier break clauses. As frequently repeated here, it really is too early to make big predictions for the market when so much still depends on human behaviour post-Covid. As always, we would be interested to hear your thoughts on this. 


 

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group