Dublin’s office market is likely “to get worse before it gets better” with no relief in sight until 2027 amid a collapse in demand and a glut of new developments delayed during the pandemic finally coming on stream, a new report from BNP Paribas Real Estate has indicated.
Some 24,487sq m of office was leased in the capital city between October and December, bringing full-year take-up to 122,951sq m. Apart from 2020 when the market was effectively shut due to Covid, 2023 saw the lowest take-up of office space in the city since 2010 following the collapse of the property market, BNP said.
Dublin’s “heavy reliance” on the international tech sector to drive demand for offices meant it was caught in the firing line last year as large-scale employers such as Meta, Amazon and Google trimmed their Irish headcounts, according to the report. ICT accounted for more than half of all office leasing from 2019 to 2021, but just 21.4 per cent in 2023, the report said.
A recovery before 2027 is unlikely to happen unless tech leasing rebounds, the economy creates jobs at a faster pace than expected or the return to the office gains significant momentum, according to the report.
Because of the outsize importance of tech demand in the market, Dublin was also hit disproportionately by the rise of remote working during the pandemic, said report author John McCartney, director and head of research at BNP Paribas Real Estate Ireland. He said the average space requirement per employee in the market had remained sharply lower since the pandemic, indicating a “weakening of the relationship between employment and office demand”.
At the same time, a number of office developments that were delayed during the Covid pandemic are now “spilling into 2024″ boosting supply “by more than the market can digest”.
While the downturn is not particularly deep by historical standards, BNP said the “real challenge is likely to be the slow rate at which this surplus space becomes reabsorbed” with remote working still very much a feature of working life in Dublin.
Mr McCartney said: “Before Covid, every new desk job generated around 10sq m of office demand. However, this figure has plunged by two-thirds since Covid. With only 3.2sq m now being consumed for each additional job, it is going to take longer than before for the market to digest the vacancy overhang.”
A pickup in activity has, however, been evident in the early weeks of the year, said Keith O’Neill, head of office agency at BNP.
The BNP Paribas report comes days after another property agency, HWBC, said tenant activity in Dublin was nearing the bottom of its post-pandemic contraction.
It said that companies continue to be cautious on office requirements due to higher costs, political uncertainty and structural shifts in work patterns.
It noted that there was only one deal for more than 50,000sq ft last year, compared with 10 in 2022 – although HWBC also anticipates several large deals being completed this year.
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