COVID-19's Impact on Irish Commercial Real Estate
This is a very difficult time for everyone. From frontline staff working in hospitals to everyone making sure there’s still plenty of food for everyone and for everyone who is out of the job due to COVID-19. It’s fair to say that our world will change forever. One sector that has (nearly) always been a solid investment and a thriving sector is Commercial Real Estate. However, with remote work on the rise employers are beginning to question the importance of an office for their workers. So, what affect will COVID-19 have on the Commercial Real Estate sector?
Investment Slowing Down
The commercial property market in Dublin was hot off the mark in 2020, According to Cushman and Wakefield investment was at an estimated €515 million before COVID-19 brought the country to a grinding halt. There were high levels of leasing and investment, especially in the capital, right up until the end of March, when the government increased measures to flatten the curve of COVID-19. It’s difficult to know when the markets will return to normal as the virus could have a lasting effect on the Irish and Global markets for years to come.
Will there be a fall in Demand for Offices?
Remote work is nothing new. There are plenty of startups all over the world working with teammates dotted across the globe. It’s also very common amongst the Software as a Service (SaaS) companies like Buffer, Hubspot and Zapier to name a few. However, the sudden shift to remote work on a national scale is proving to be difficult. There are so many workers that are cramped up in their home with children and very little freedom. But a lot of people will definitely be looking into working remotely full-time or at least more often than pre-COVID19
President of the Global Workplace Analytics predicts that:
“ 25 - 30% of the workforce will be working from home multiple days per week by the end of 2021 ”
JLL’s Deirdre Costello doesn’t see the future workplace as 100% remote as a lot of people will miss the social aspect of an office and sees a more hybrid approach in the future.
“The emergence of a hybrid model where people work predominantly in an office but have greater flexibility to allow remote working is here to stay. I don’t foresee a drop in demand for office space due to remote working, however, what we will continue to see is the office space being used differently"
This will come as some comfort to investors and asset owners involved in commercial property.
Long Term Investors
While the immediate impact of COVID19 will have caused a huge effect on commercial property values but the Dublin office sector should be able to survive the current short term market fluctuations. Due to international investment, the sector has been strengthened. A lot of the stock is held by international institutions, focused on a long-term steady income.
In the recent ‘Dublin Office Market Overview’ by property consultants Knight Frank states that:
“Dublin’s office investor base is extremely well diversified internationally with the resulting pooling of risk increasing the market’s resilience”.
They also echo Costello’s thoughts and have no fear of remote work replacing the traditional office space: “Companies have long learned that real estate is a key business infrastructure for driving productivity that more than outweighs the direct real estate cost.”
It looks like COVID-19 will merely cause a wobble in the commercial property but it’s uncertain when the market will return to a steady pace of growth once more.
The Future For Irish Commercial Real Estate: Post COVID-19
So the future looks good for the commercial real estate market and for workers as well. This is very unlike the recession where there was a massive property bubble and the banks needed to be bailed out. There is a sense that this will end soon but there will be a very different environment as companies and employees will be looking to hire and work remotely more often.
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