The latest report on Dublin’s office market by BNP Paribas Real Estate Ireland (BNPPRE) points to solid activity in 2022, but predicts a more challenging year ahead.
Headline figures show that just under 248,000 sq m of Dublin office space was taken-up in 2022. This was the busiest year since 2019, with leasing up 63% on 2021. Moreover activity was broadly-based with strong demand from Financial Services, Aircraft Leasing and Professional Services firms resulting in a more balanced distribution of lettings between sectors than in recent years.
However, while take-up is back above pre-Covid levels in other sectors, the global tech slowdown has triggered a sharp reduction in leasing by ICT firms which accounted for just 11.7% of take-up in H2 2022 compared with nearly 50% between 2017 and 2021. As a result, overall take-up in 2022 remained well below the 2017-2021 average of 305,000 sq m.
Looking ahead, Dr. John McCartney, Director of Research at BNPPRE, says that 2023 will be a more challenging year for Dublin’s office market;
“Remote working is causing office take-up to lag service sector employment growth. In addition, the continued tech sector slowdown will drag on the quantity and quality of lettings. Increased sub-letting and ‘churn’ reduced the extent to which gross take-up fed through to an increase in tenanted space during 2022, and this trend will continue in 2023.”
McCartney also pointed to a further pipeline of new offices which are scheduled to complete in 2023;
“With a further 230,000 sq m scheduled for completion in 2023 and with a sluggish global economy slowing the speed at which this can be absorbed, we believe that the vacancy will peak at around 15% by year-end.”
However, while near-term conditions remain challenging, BNPPRE says there are clear reasons to maintain a positive medium and long term perspective on Dublin’s office market.
Keith O’Neill, Director of Office Agency at BNPPRE said;
“With relatively little new office space scheduled for delivery after 2023, with the global economy expected to pick-up next year, and with Ireland set to continue outperforming, vacancy should fall again in 2024 and this will underpin rents and values.”