Dublin's Office Market Faces Up To Glut Of Completions
A leasing surge from professional services firms and a Covid-19 rebound will not be enough to counterbalance a glut of new office space coming onto the Dublin market in 2022, a new report has said.
The latest office report covering the last quarter of 2021 from BNP Paribas Real Estate Ireland said that vacancy rates could hit 10% as 2.6M SF of office space is scheduled for completion this year, with projects held back by the coronavirus pandemic finally finishing.
The report noted that around 4.4M SF was under construction in the city centre, with a further 237K SF in the city’s suburbs.
Prime rents are still to recover their pre-Covid peak, standing at €57.85 per SF. However, the highest rent achieved in the City centre was 2 Windmill Lane, Dublin 2, which was let for €62.54 per SF. Rents aren’t expected to recover to their pre-Covid levels until 2024, which BNPPRE said will “provide opportunities for tenants”.
BNPPRE Director Of Research John McCartney said that lettings would need to reach approximately 3.2M per SF per year to absorb all the extra stock. "Due to the strong construction pipeline we expect Dublin’s office stock to rise by over 2.15M SF in 2022," he said.
"Approximately 1.7M SF of office space was leased in Dublin during 2021. Despite the improving trend, occupier caution about the return to offices means that it will be challenging for this figure to double in 2022. As a result we don’t expect vacancy to tighten this year."
The report showed that Q4 Dublin office lettings were up 245% year-on-year with 979K SF leased, but the rise was due to abnormally low levels of leasing in 2020 as the pandemic took hold.
In terms of market share, telecoms and tech clients saw the proportion of leases fall from an average of 55% between 2017-2020 to just over a third in 2021, with BNPPRE stating that travel restrictions meant less take-up from global clients but also "large tech firms taking time to work through their longer-term occupational strategies".
