Increased focus on office investment in the Irish capital due to compelling fundamentals

Office-based employment in Dublin growing at twice the European average

Shortage of Grade A buildings will deliver above-average office rental growth over the next 5 years

Many of the factors attracting investors to the office sector at this point in the cycle are similar across geographies.

• Capital values for prime office opportunities have corrected by as much as 25%, creating an attractive entry point for investors. Values in the sector are stabilising, with total returns in many markets moving back into positive territory over recent quarters.
• Many occupiers are now in a position to make location and expansion decisions. Occupational activity is improving, buoyed by a notable increase recently in ‘return to office’ mandates.
• With many markets experiencing limited or no availability of sustainable Grade A buildings, there is potential to achieve strong rental growth for best-in-class buildings, which is attractive from an income-generation perspective.
• There is increased occupier focus on modern, sustainable workplaces that offer high-quality amenity. This has led to a notable bifurcation between the performance of modern sustainable and highly amenitised Grade A buildings in city centre locations and the rest of the market.

Against this backdrop, Dublin (where all of these trends are evident), is an interesting opportunity. Home to the global or EMEA headquarters of over 250 of the world’s leading companies, Dublin is a European gateway city. Ireland’s strong fiscal position, stable political environment, high credit ratings, and continued multinational investment provide a solid foundation for economic resilience and job creation. At a time when many economies are downgrading growth expectations, the Central Bank of Ireland recently upgraded forecasts for economic growth in Ireland in 2025 to 2.9% – more than twice the European average.

Occupational activity in the Dublin office market is consistently around 2 million sq ft per annum and will comfortably exceed this in 2025. Growth sectors, including professional services & financial services, account for more than two thirds of leasing activity in the city annually. The fact that, according to Oxford Economics, office-based employment in Dublin is growing at 2.1% per annum (twice the European average) gives comfort that this trend will continue.

Within our own portfolio, at IPUT Real Estate, which is wholly concentrated in Dublin, we have completed more than 100,000 sq ft of new office lettings in the last quarter alone.

In our experience, the quality of the amenity offering in our city centre workplaces has been instrumental in attracting occupiers.

Like many other core markets, Dublin is now facing a significant supply crunch.  The Grade A+ availability rate, which according to JLL, currently stands at approximately 4.5%, is set to be completely eroded in the next two years. With no modern sustainable office accommodation available in the prime CBD, Dublin is set to achieve above-average office rental growth over the next 5-year period.

Our recently commissioned research shows that Dublin offices delivered an above-average return on a risk-adjusted basis, compared to other leading European cities, in the last decade. Dublin offers more relative value than many other competing cities and it is important to point out that the volatility previously associated with the Dublin investment market has been eroded.  Healthy market fundamentals are underpinning strong growth prospects. I believe that the Dublin office market is poised to deliver outperformance in the next cycle and should be on the radar of discerning investors looking for a growth opportunity.

The IPUT team will be at Stand 334 in Hall 2 at the EXPO Real conference in Munich between October 6 – 8^th.