The impact of the Covid-19 crisis on Dublin’s commercial property sector will not be known for months and even years to come. But one question remains, if working from home, becomes a standard practice by employee’s choice or enforced by the employer, what will become of Dublin’s office market?
The mantra put out by commercial real estate agents, that companies and employees will be more than happy to return to the office after the pandemic ceases. However, others are predicting a more permanent decline in office space. With the increase in technology, video conferencing, email, online documentation & signing, the upcoming advances of 5G, the need for everyone to be in the same building or office, is non-essential.
What is the solution to declining demand for office space? Commercial landlords will turn their office buildings into residential space and help alleviate Dublin’s housing crisis.
Leases for one third of office space in the first quarter of 2020 have fallen through, according to a survey of the Dublin office market.
Estate Agent, Savills Ireland, quoted “Q1 agreement on new leases for 88, 500 sqm of office space, some 15,460 sqm had fallen through, with 13,730 sqm postponed indefinitely” pending greater certainty on the impact of Covid-19.
Demand for office space, will not disappear, however, we could see companies focus more on providing their employees with share office space, co working space, virtual office and flexibility to work remotely when they need to.
For obvious reasons, this would be an easier way to expand residential housing in Dublin, than constructing residential projects from the ground up. In addition, it is an easier way to increase residential housing without encountering community or planning permission opposition, because the building is already there.
On the flip side, there are concerns, that taking so much office space off the market and turning into residential, would lead to commercial rents becoming more expensive.
Personally, I feel the retail sector, which I call the ‘ground floor’ guys, have a much tougher prospect than office holders. Retailers are more likely to experience lasting changes from the pandemic than office sector, as retailers were already struggling pre crisis, due to high rents, falling demand and online sales.
This pandemic will be with us long into 2021. It will cause massive closures in retail and obviously a knock-on effect into office space. With such a free up in commercial space, developers will have no alternative but to convert this massive vacant space into residential, leading to a reduction in Dublin house prices and in due course an increase in Dublin commercial rents.