Office Space Consumption Falls by Two-Thirds Due to Remote Working Supply Spike Coming as Delayed 2023 Completions Spill Into 2024 Occupiers Focused on Energy Efficient Buildings But Do Not Have Unlimited Willingness to Pay
According to a new report by BNP Paribas Real Estate Ireland (BNPPRE), Dublin’s office market will get worse before it gets better and is likely to be under pressure until the end of 2026 or early 2027.
Delayed building completions from 2023 are now spilling into 2024, boosting supply by more than the market can digest, and propelling vacancy upwards towards a projected peak of 16.6% in 2015.
While this does not represent a very deep downturn by historical levels, the real challenge is likely to be the slow rate at which this surplus space becomes re-absorbed given the mainstreaming of remote working.
John McCartney, Research Director at BNPPRE, says
“Before Covid, every new desk job generated around 10 sq m of office demand. However this figure has plunged by two thirds since Covid. With only 3.2 sq m now being consumed for each additional job, it is going to take longer than before for the market to digest the vacancy overhang.”
According to BNPPRE’s analysis the market is destined to be oversupplied by approximately 250,000 sqm by next year. Given the historical rate of jobs creation, and assuming that the space-per-employee ratio settles at 3.2 sq m, the report says it could easily be the end of 2026 or early 2027 before the market downswing bottoms out.
However, Keith O’Neill, Head of Office Agency at BNPPRE says a better outcome is possible;
“2023 has been a challenging year for the market with a slowdown in Tech leasing, and the impact of Covid-19 impacting on demand. However, activity has palpably picked- up in the opening weeks of this year and a number of large corporate requirements are live in the market.”
Realistically, however, for any meaningful recovery to kick-in before 2027, several factors would have to line-up. These include;
- A recovery in leasing by Tech companies which have been much less active since the
global tech shock in 2022
- Stronger than expected jobs growth
- A stronger return-to-the-office dynamic, which would increase the multiplier between
jobs growth and office demand.