A recent report by Knight Frank suggests that Dublin’s office vacancy rate will surge this year due to the completion of eight new building projects despite a resurgence in space demand over the last few months. The company’s latest market report discloses a surge in the city’s vacancy rate to 15.9% in the three months ending June, a slight increase from the conclusion of the first quarter.
The market was adversely influenced last year by the expanding trend of remote and hybrid work setups, combined with a decrease in demand from the tech sector, a major player in Dublin’s office space demand. Nevertheless, the second quarter witnessed a significant uplift in occupancy levels, with most businesses sealing deals for spaces much larger than their previous premises.
Noteworthy transactions include Stripe’s acquisition of nearly 14,500 sq m at One Wilton Park, Dublin 2, and BNY Mellon’s commitment to approximately 7,331 sq m at the Shipping Office on Sir John Rogerson’s Quay. The HSE’s acquisition of nearly 17,000 sq m at the Seamark Building, Dublin 4, courtesy of the State, marked the most substantial deal of the quarter.
Knight Frank acknowledges signs of recovery in the market as demand rallies. The 2024 delivery pipeline remains the only persistent challenge to the vacancy rate. The forthcoming projects this year, of which only 53% is pre-let, will likely exacerbate the issue. The largest pre-let is A&L Goodbody’s commitment to almost 14,400 sq m at 25 North Wall Quay, Dublin 1.
The completed space during the second quarter contains a substantial amount of large schemes, stated by the authors of the report. Two of these big projects include Marlet’s College Square and Building Two of Kennedy Wilson’s Cooper’s Cross in Mayor Street, Dublin 1. Presently, these projects account for a tenth of the total market vacancy.
Additionally, there is an expectation of 300,000 sq ft of new unoccupied space that will become available in the latter part of the year. Joan Henry, Chief Economist and Director of Research at Knight Frank Ireland, indicates that this will further raise the vacancy rate. The rate, however, is anticipated to reach its peak by the end of the year and begin receding into 2025 as the pipeline of developments eases. After 2026, no other office spaces are scheduled to be finished.
Despite the prospect of dropping prices, the report reveals that primary rental yields have consistently remained between 5 per cent and 5.25 per cent. Rent costs are expected to increase in 2025 due to a mix of increased demand and higher costs, Henry stated.