The Viability of Converting Offices into Residential Spaces

Ireland’s commercial property market has experienced significant shifts in recent years, with the value of 1970s-era offices declining. Also, investment activity in the Irish property market has reached a new low, with higher interest rates by the European Central Bank dampening transaction activity. Against this backdrop, there is a growing trend of Irish developers converting offices into residential spaces and a number of our home builder clients across Ireland are exploring this right now as a potential route to delivering new homes.

The recently-published MSCI/SCSI Ireland quarterly property index has revealed that the value of central Dublin offices continued to fall, dropping 3.1 percent in the first quarter, representing a 15.7 percent fall year-on-year. Particularly, older offices dating from the 1970s suffered the sharpest falls, with a decline of 5 percent in the quarter and 18 percent over the 12 months. This trend is indicative of the challenges faced by traditional office spaces globally, especially those lacking modern features and energy efficiency.

Earlier this week it was reported that investment activity in the Irish property market has seen a significant decline, reaching a new low of €163 million during the first three months of the year. The office market, in particular, continues to experience high vacancy rates, leading to a decrease in investment sales. This has been attributed to companies reducing space requirements due to remote working and downsizing in the tech sector. The subdued investment market, coupled with higher interest rates by the European Central Bank, has contributed to the overall dampening of transaction activity in the property market.

In the face of these uncertain market forces and the ongoing challenges faced by the commercial property market, there is a growing number of developers converting offices into residential spaces, as profiled by the Business Post in recent weeks. One featured project involved the transformation of one office block in Tipperary into nine individual, energy efficient apartments at a cost of approximately €180,000 per home, demonstrating the potential cost efficiency of such conversions. The viability of converting offices into residential spaces is further supported by a report from the Housing Agency, which highlighted the cash and carbon savings that developers can achieve through commercial-to-residential conversions. 

 At a glance, this move towards converting offices into residential spaces presents an interesting opportunity for home builders across Ireland. With declining commercial property values, increasing vacancy rates, and an ongoing shortage of homes of all types and tenures, there is undoubted potential for developers to repurpose underused office spaces into much-needed residential units. If you are considering such a project, contact the Lotus Investment Group team for more information and for area-specific market insights.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group