Dáil Éireann Debate, Wednesday - 25 October 2023
76. Deputy Catherine Connolly asked the Minister for Public Expenditure, National Development Plan Delivery and Reform further to Parliamentary Question No. 96 of 15 November 2022, the details of any analysis carried out by his Department into the impact of the ongoing rise in rental prices on the cost of the rented portion of the OPW's office accommodation portfolio; and if he will make a statement on the matter. [47053/23]
View answerAs referenced in the answer to Parliamentary Question 56397/22, one of the key functions of the Office of Public Works (OPW) is to provide office accommodation for all Government Departments. In this regard, OPW holds a portfolio of property throughout the country to meet the various operational needs of the Civil Service, the Gardaí and various other State Bodies. The OPW office portfolio comprises 896,842 square metres, (year end 2022), both owned and leased, which are managed and maintained in an optimum manner designed to support the business function while delivering value for money to the Exchequer.
In its role of managing the extensive office accommodation portfolio, the OPW are consistently monitoring the commercial office market. All market data and trends are observed and these key information sub-sets utilised to best effect to manage the portfolio. Significant challenges posed by global instability on a number of geo-political fronts and their cumulative impact on the worldwide economy remain ongoing and have, if anything, worsened over the last twelve months. Such challenging macro-economic conditions for the property market have been further exacerbated by the challenge of climate action and the post-covid impact of blended working on the traditional workplace environment.
These two issues in particular have led to a significant divergence of the commercial office market, with Grade A recently developed stock that has the highest sustainability credentials leading the way in terms of demand, with relatively stable rental performance. Conversely, the observed demand for older and poorer performing property is slowing, despite more attractive rents.
In relation to the leasehold portfolio, fluctuations - both upwards and downwards - in the rental market can impact on rental costs via a number of different events, namely: rent reviews, lease renewals, new leasehold acquisitions, lease breaks, etc. In all instances, OPW engage in an active asset / lease management programme in order to avail of cost mitigations where possible, including lease re-gearing, downward rent reviews, exercising of break options, building upgrade opportunities, etc.
For the OPW, the issue of blended working is significant. In the face of a growing Civil Service, the shrinking of the portfolio will be challenging. Current Civil Service staff numbers have grown by 23% since 2017, with the accommodation portfolio remaining relatively static. In the face of further civil service growth and increased demand for space, the focus will always be on the exploration of opportunities within the existing estate in the first instance. In this regard, blended working has released opportunities for absorption of growth into the existing portfolio with the consequential savings resulting from the avoidance of new rental liabilities into the future. Careful asset management of the portfolio will be utilised to achieve any “right-sizing” opportunities that emerge once blended working impacts have become clear.
In parallel, the legislative imperatives for sustainability led intervention works across the portfolio – both owned and leased - will also open up opportunities for achieving greater space optimisation and utilisation with an obvious focus on the owned estate. In this context, it is worth noting that while “best in class” buildings, which the State is mandated to acquire legislatively, provide efficiencies from an operational and occupational point of view, by their very nature they are expensive.
The OPW is mandated to provide fit-for-purpose office accommodation to its clients. It is also mandated to do so in a sustainable manner and in compliance with the Public Spending Code whereby the achievement of value-for-money is confirmed. There are manifold challenges in terms of achieving value-for-money: a growing civil service, a restricted supply of quality accommodation, significant sustainability requirements; a challenging economic environment. However, prudent asset management coupled with close liaison with client departments to utilise the owned and leasehold office portfolio to its optimal potential while at the same time meeting their operational requirements will ensure that all opportunities within the existing estate are fully realised.
