A resurgence in Dublin’s office leasing sector may be indicative of a decline in the influence of remote working, as the optimism in the market soared, reaching a two-and-a-half year high at the end of June.
The latest report from BNP Paribas Real Estate, a reputable commercial property broker, showed that organisations dedicated to a substantial 86,250 square metres of space in quarter two. This marked the first time in a year and a half that take-up exceeded the decade-long average of 60,000 square meters during the second quarter, as disclosed by the firm.
However, the report also noted an increase in the vacancy rate due to a surplus of new properties entering the market in comparison to the demand, which has been affected by the emergence of remote and hybrid working models. Potential job losses and a slowdown in the tech sector, a major contributor to the office demand in Dublin, also took a toll on the market in the previous year.
John McCartney, Research Director at BNP Paribas Real Estate, commented that current demand conditions were satisfactory given the underwhelming tech sector performance. He highlighted that the significant factors were mainly supply-related. In the first half of 2024, 140,000 square metres of new stock was added, with a further 17 buildings covering 250,000 square metres expected to finish by the end of the following year. McCartney noted that the small Dublin market would find it challenging to absorb this amount of space, leading to an inevitable rise in vacancy rates, even with the leasing cycle likely having hit its lowest point.
However, despite the notable oversupply, primary rents have remained steady at €673 per square metre annually for the past two years. Nevertheless, general inflation has lead to landlords’ real value decreasing by 8.5%, providing tenants with a better value in real terms. The report also highlighted other subtle indicators of a tenant-friendly market such as decreasing lease durations, early termination options, and extended rent-free periods at the commencement of leases.
The boost in leasing activities is an indicator of occupier trust regeneration and a diminishment of the challenges associated with working from home, commented Keith O’Neill, the executive director and leader of office agency at BNP Paribas Real Estate. Both the cut in interest rates seen in June and the systematic bolstering of the economy have led to a significant advancement in overall outlook. Moreover, the phenomenon of blended workers attending office more frequently is not only escalating office occupancy demand, but also contributing to a more dynamic urban environment.
Managed to be published last week, JLL Ireland’s research revealed that in the second quarter, leasing operations experienced more than two-fold growth compared to the same period of the preceding year.
The most sizable agreement during the span was reached with the payments organisation Stripe, which committed to taking 156,000sq ft (14,492sq m) of office premises at Wilton Park One.