Remote Working, Tech Slowdown, and Supply Surge Will Drive Dublin Office Vacancy to 2023 Peak

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.”