Take-up of Dublin office space by technology companies shrank to just 7.1 per cent in the third quarter, according to a new report by BNP Paribas Real Estate Ireland. The sector accounted for half of all business a few years ago.
The overall office market in the capital saw some “positive momentum” during the three months to the end of September, though the tech sector remained moribund, its analysis found.
A total of 47,926 q m of purpose-built office space was taken up, an increase of 66 per cent year-on-year. This was marginally above the long-term average for the third quarter. Some 47 transactions were completed, slightly up on the 44 that were completed in the same quarter in 2023.
This consolidated an improvement seen in the second quarter and came amid strong demand from the financial and professional services sectors, BNP Paribas Real Estate director of research John McCartney said.
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But Dublin still has one of the highest office vacancy rates among European cities. The vacancy rate edged up from 15.2 per cent as of the end of June to 15.7 per cent at the end of the third quarter, while the tech sector remained relatively inactive.
Between 2017 and 2021 the information and communications technology sector accounted for 51 per cent of all Dublin office take-up, with many of the world’s biggest tech companies consolidating their operations and growing their staffing levels in the Irish market. But the sector’s share of Dublin office take-up has only averaged 22 per cent since the start of 2022, and in the third quarter it fell to its lowest share since the start of BNP Paribas Real Estate’s records, accounting for just 7.1 per cent of the pie.
Across the market the average transaction size rose from 655sq m to 1,020sq m in the third quarter compared to the same period in 2023. However, only one deal of more than 5,000sq m was done: a 12,396sq m lease assignment from LinkedIn to EY at Two Wilton Park.
“This compares with a long-term average of three such deals per quarter, and likely reflects the continued inactivity of global tech occupiers in the current market,” said Mr McCartney.
The report said that nearly half of the space taken up in the third quarter was accounted for by sub-lets/assignments which did not reduce overall vacant space.
It noted that tech employment in Dublin rebounded by 11.3 per cent in the first half of 2024, hitting an all-time high of 94,200 jobs in June. Although this is not yet reflected in the leasing statistics, the growth “should naturally support office demand” in the longer run.
But a stalling in post-Covid return-to-office policies may hurt demand, it adds, citing Central Statistics Office figures showing 58 per cent of workers in the ICT sector spend most of their time outside the office.
“The ongoing improvement in take-up is an important first step towards a market recovery,” Mr McCartney said. “However, with a significant pipeline of new space already under construction, vacancy is likely to tick-up further in the short-term, keeping pressure on rents.”
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