State of the Occupier Update - Dublin

Almost all office-based workers are working remotely from their homes.

Occupier clients are seeking information and advice on securing relief for their businesses at this stage. This is both in the form of negotiations with their landlords and in assistance from the government. They are keen to understand the underlying impacts on the market and general economy in order to appropriately plan ahead. As with all markets, daily developments are making the impacts difficult to predict. Off the back of a strong market and fast-growing economy, Ireland announced an early package of €3.1 billion on March 9th, which included the COVID-19 Pandemic Unemployment Payment (PUP) for impacted workers and liquidity assistance payments for small businesses. This was followed on March 24th with a further €3.7 billion spending package, which included a 12-week wage subsidy scheme (WSS) to cover 70% of the wage bill for employers in vulnerable industries (up to a cap).

On March 27th, the government announced a full lockdown in Ireland. This has triggered an immediate sharp jump in the number of persons filing for social welfare benefits: By March 30th the number of approved payments had risen to 283,000, up from 118,000 in a week.

We are watching for signs of the potential longer-term impacts of COVID-19 on Dublin office demand. It will depend on both the reaction of large U.S.-based occupiers to the spread of the coronavirus in America and whether this pandemic becomes a catalyst for increased remote working.

OCCUPIERS?

Many leasing deals are on hold at present, with tenants reluctant to sign until restrictions are lifted. Tenants who are proceeding with their new leases are seeking extended rent-free periods to cover uncertainty.

We have seen some occupiers applying for the WSS to cover 70% of the wage bill for employers in vulnerable industries. 

Discussions with landlords to restructure leases have begun, with the most common early adjustment being a change from rent payments being paid quarterly in advance to a monthly schedule. Where rent reductions or holidays are required, tenants are typically offering to either extend their lease terms or pay back the concession over the term. Tenants in serviced offices or coworking spaces have been opting to forgo their rent payments, leaving the coworking providers vulnerable unless they are able to achieve relief from their landlords. 

We expect to see excess space coming to the market for sublease soon. Due to the market dynamics over recent years, we have seen many fast-growing tenants banking space for future expansion, space that now will likely be the first to come on the market.


LANDLORDS?

Landlords have been staying in contact with their tenants and engaging with them when necessary. They are managing their buildings in line with health guidelines, and arranging for virtual views to facilitate occupiers still active in the market. 

With construction and development slowing, it is expected that current 2020 projections will be reduced by approximately one-third as completions are pushed to 2021. Some developments planned for completion further out may be cancelled or postponed as landlords look to repurpose and let existing stock as a priority.


DEVELOPERS / INVESTORS?

Some cash-rich investors continue to see opportunities for distressed assets; otherwise, most are adopting a wait-and-see approach.

There are several opportunities for occupiers:

Contact us.