According to JLL Ireland, a commercial property group, office renting activities in Dublin has decreased to its most minimal level in over a decade, excluding the COVID-19 years. In the first quarter, the group witnessed low leasing levels, with 196,000 square feet across 31 deals. Compared to the last quarter and the five-year quarterly average, this space volume dropped by 44% and 63% respectively. The typical deal size also reduced by 56% from the five-year annual average before the pandemic to 6,346 square feet.
Apart from 2020 and 2021, these numbers represent the most diminished quarterly volume of leased space since 2013. Despite the softened leasing activities, occupants were operative with a space reservation volume of 800,000 square feet. This marked a 35.8% boost quarter-on-quarter and a 20% surge above the average space reserved quarterly in 2023.
JLL pointed out the sharp increase in reserved spaces, suggesting that the cycle could be approaching its bottom. In the market, the vacancy rate escalated to 15.4% from 14.9% of the previous quarter. However, when the rate eliminates Grade B and C spaces, expected to be functionally outdated by 2030, and considers only Grade A+/A spaces, the vacancy rate reduces to 7.8%.
Dublin’s vacancy rate has been significantly impacted by sublease and assignment space, also referred to as “grey space”. This reached a new peak with an 18% year-on-year growth, although JLL predicts that it will fall as the year progresses. According to the report, some occupiers have verbally suggested they might withdraw their grey space from the market as the economy gains clarity and employees begin returning to the office.
Sub-regions Dublin 2 and Dublin 4 house the most grey space, accounting for 885,000 sq ft and 500,000 sq ft respectively. Noteworthy properties possessing grey space entail the Fibonacci Square in Ballsbridge, One Park Place on Hatch Street, and the leftover vacancy at Cadenza on Earlsfort Terrace.
The latest bulletin highlighted, “Although there’s been a surge in Dublin’s vacancy rates, the migration towards high-value real estate has generated robust demand for premium properties.” Comprehensive research conducted by JLL indicated that by 2030, 61% of Dublin’s office market is expected to be ‘functionally obsolete’ if buildings are not equipped to withstand future advancements.
Niall Gargan, JLL Ireland’s lead researcher, stated: “There’s a growing demand for sustainable, low-carbon premises. Nonetheless, our study reveals that supply will struggle to match the demand unless there’s a significant increase in retrofitting efforts. By 2027, Dublin will face a severe crisis as the pipeline for new deliverable space will have dried up, leaving only 39% of the marketplace ready to operate in an era where high sustainability standards are the norm.”
He further emphasised that the situation is indicative and corporate tenants are required to demonstrate progress towards operating more sustainably. Correspondingly, buildings must accelerate their adaptation efforts.