Google abandons new Dublin office, signs change

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Google signage.

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When google announced last month that he was disconnect a lease for a new office space in Dublin, Ireland, this set off alarm bells.

Google has a big presence in Dublin’s “Silicon Docks” where it has its European headquarters, a part of town around the docks area where a who’s who of Big Tech is, including Facebook, Twitter and Airbnb.

But during the coronavirus pandemic and with the need for remote working, questions arise about the viability of large office spaces. Google said it remains committed to Dublin – where it has more than 8,000 workers – and has bought two more buildings which it still plans to fill.

Dublin’s commercial property market crashed in the second quarter as the country was in the depths of lockdown, according to property firm CBRE, which recorded only 15 office rental transactions during this period.

Marie Hunt, head of research at CBRE, told CNBC that there will likely be a slowdown in new office supply in the coming months because of Covid-19, but also because “tech occupiers tend to withdraw during a presidential year”.

Government agencies have been unable to conduct site visits and visits to entice companies to invest, and Hunt said this is causing “weakened adoption”.

Shane Fleming, property expert and founder of Fleming Real Estate, said this trend is not unique to Dublin, but the Irish capital still has several large office deals signed and underway, highlighting ongoing Amazon expansions and LinkedIn.

TIC Tac, according to reportsis looking for a large office space in the capital that can accommodate up to 5,000 people.

Fleming added that housing shortages for city workers as well as planning policies around building height present additional challenges. “If Dublin City Council does not allow heights to be increased in certain parts of the city, Dublin will lose future opportunities, he said.

The sorting office that Google planned to lease in Dublin, Ireland.

Google Dublin sorting office

Efficiency

Simon McEvoy, the Irish boss of shared office provider Knotel, said it didn’t make sense for companies to invest in new space until they can bring back significant numbers of workers.

“It’s not always viable to open a large facility for 10% of your workforce,” he said, adding that workers may experiment and use their office space in different ways in the future.

“It won’t necessarily be where you go from 9 a.m. to 5 p.m., Monday through Friday, but they will go for different reasons at different times. How the desktop is delivered to the end user is where a lot of the change is going to happen.”

Carol Tallon, managing director of Property District, which advises clients in the real estate and construction industries, told CNBC that office tenants can often be “exceptionally inefficient” in how they use their spaces.

There will have to be a huge rethink of how space is used, she said.

“The way we use the office is going to change as a result of this pandemic and I don’t think it’s fatalistic to say that now,” she added.

Controlled development?

CBRE’s Hunt highlighted a difference between the real estate market today and what it was during the 2008 financial crisis.

“There was a lot of funding available as the global financial crisis approached. Much of the office development in Dublin was being built speculatively,” she said.

When the accident happened and the purse strings tightened, it left many offices vacant. In recent years, development has been more controlled, with developers finding tenants before building.

“It’s not as obvious from a supply perspective,” Hunt said. “This means that there are a limited number of new empty buildings, waiting for a tenant. For this reason, there could be some easing in the office (market), but it will not be close to the level of easing we’ve seen over the last cycle.”

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