Will prime offices remain immune from the commercial property downturn?

In the current downturn in the Dublin office market, it is accepted wisdom that new, high-grade buildings will have no problem finding tenants but owners of older, less energy-efficient properties will struggle to fill their space.

On the face of it, that logic makes perfect sense: a company looking for new space now needs a really nice building in a great location to attract workers back into the office. The rise of remote working has made it imperative for firms to offer excellent amenities to lure staff away from their desks at home, and burnish their ESG credentials while keeping energy costs down.

But what if the accepted wisdom is wrong? A fascinating report from the Wall Street Journal this week suggests it could be.

Asking rents for prime office space in 16 markets in the US declined during the third quarter of last year, according to the report, while the proportion of lettings going to so-called premier towers has dropped. Indeed, new office construction in New York has essentially stopped, the newspaper said. Part of the reason is an acceptance that workers aren’t coming to the office more than a few days a week, and that won’t change no matter what companies offer. As a result, firms are reassessing the value of paying big money for swish new offices that won’t make any difference to their staff.

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Could this be a preview of what’s coming to Ireland? There are a couple of reasons to suggest the same won’t happen here: Dublin is a much, much smaller market so a couple of big lettings make a disproportionate impact, the most desirable areas are already more or less fully occupied, and given the emphasis on ESG it is imperative for businesses to be cutting their carbon emissions.

Still, if companies decide they’ll never get staff in the office more than a few days a week, why bother spending money on fancy digs for a staff that won’t be there? Why not spend less money on an older, less efficient building in a less prestigious location and save some cash instead? Avoiding these questions will become harder the longer the downturn continues.

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