The Race For Space: Occupier Demand Begins To Turn Dublin Office Market Around

As Dublin’s commercial real estate market prepared for the worst last year amid global tech layoffs, the city’s reliance on the digital sector looked as if it may have backfired — low levels of activity looked as if they could be the precursor to a severe dip.

Yet tech’s contraction has not been as sharp as first feared, and reports suggest occupier interest in Dublin’s office stock is up, with several high-profile international corporates completing leases or searching for space.

With new space due to come online in the next year, vacancy could still rise, and the sector is not out of the woods yet. But an increase in takeup and demand is signalling that a repeat of the dark days of the 2008 financial crisis has been avoided.

“At face value, the digital slowdown has not impacted office demand too badly,” BNP Paribas Real Estate Director and Head of Research John McCartney said.

According to CBRE figures, Dublin office takeup totalled 934K SF in Q2, the strongest quarter since Q4 2021. Occupiers signed 51 office transactions in Q2, and active requirements rose to more than 2.7M SF, a 5% increase quarter-on-quarter. The Dublin office vacancy rate is now just over 18% following the practical completion of some notable developments in Q2, including the final building of Kennedy Wilson’s Coopers Cross.

The Q2 Labour Force Survey from the Central Statistics Office showed a 6.4% increase in tech employment in Dublin over the year to the end of June, with a record 94,200 people in the capital now working in the sector.

However, alternative CSO employment data, based on company payrolls, has indicated that tech employment contracted by 2.7% over the same period, and several large tech firms have announced further job cuts in Ireland. Those include Meta's two announced rounds of job cuts and Intel's plan to reduce its staff count by 15%, or up to 750 jobs, although many of those are in manufacturing.

Although Q2’s 28.1% tech share of office takeup represents an improvement, it remains a long way below the 51% that such firms accounted for between 2017 and 2021, McCartney said.

“Furthermore, it was heavily influenced by the 156K SF letting to Stripe at Wilton Park,” he said. “The fact that Stripe is expanding is clearly very positive, but the deal was a lease assignment because the space was already leased to LinkedIn, and it leaves a vacant space behind.”

McCartney said this doesn't reflect any negativity about the long-term influence of tech on Dublin’s office market, but he added that it may take longer for large-scale tech requirements to return.

With tech in a holding pattern, Dublin’s takeup will be dictated by other sectors, and several major professional services and financial companies have been linked with space requirements. Deloitte is set to occupy 1 Adelaide Road, where Irish Life began redevelopment in June. Apple signed a short-term deal for 5 Hanover Quay ahead of a longer-term requirement, and Workday is reportedly choosing between Kennedy Wilson’s Coopers Cross and Marlet’s College Square.

BlackRock is relocating its headquarters in Ballsbridge to Glencar House, with expressions of interest on all floors at the building. Regeneron is looking for circa 40K SF to 50K SF, Bank of Canada is seeking about 20K SF, and some legal firms are also looking in the 30K SF to 40K SF range.

Vodafone is also believed to be readying to look at south suburban and city centre locations of around 50K SF to 70K SF, with Eversheds and Marsh McLennan also understood to be looking for space. Meanwhile, EY settled on Iput Real Estate’s Wilton Park.

Following an extended period of inertia, there now appears to be a renewed confidence among office occupiers to make decisions, according to CBRE Ireland Head of Research Colin Richardson.

“Sectoral demand is quite diverse, with demand from professional and financial services occupiers, as well as public sector occupiers,” Richardson said. “Notably, demand from tech occupiers has also reemerged, with a number of new entrants set to enter the market.”

“For many, a desire for lease flexibility and minimal capex remain the key considerations,” CBRE Ireland Executive Director and Head of Advisory and Transactions for Offices Daniel Shannon said. “There is a marked focus on core locations and best-in-class space, with secondary space and locations struggling to gain traction.”

There are also many companies conducting “stay versus go” exercises whereby they may launch a search but have not decided whether they will recommit to their existing office or move, Colliers Head of Research Kate Ryan said.

“State bodies are also still quite active, and this is likely somewhat ESG-related. It’s also worth pointing out that the Office of Public Works is also retrofitting existing buildings,” she said.

The first of these to be retrofitted by the OPW to reduce its carbon emissions was a 1970s office block. Tom Johnson House at Beggars Bush in Dublin will use 75% less energy, and the building's life is expected to be extended by more than 50 years. Hundreds of employees from the Department of the Environment, Climate and Communications are moving in, while the retrofitted building will also house the National Cyber Security Centre.

“Perhaps unsurprisingly in a potential election year, employment in public administration has surged in Dublin,” McCartney said.

Even in an era of hybrid work, this would be expected to drive increased office demand and, consistent with this, health service and public administration accounted for 36% of Dublin office takeup in Q2. 

“In a small market which is in a period of slower demand, the signal can be difficult to extract from the noise,” McCartney said.

For more on the Dublin office sector, join Bisnow on 25 September for Ireland Office Summit: Attracting the Workforce at The Eight Building, Newmarket Square.