Dublin’s office market will reach its lowest ebb of the cycle next year amid a slump that has seen take-up levels fall 63 per cent in the 12 months to the end of September, BNP Paribas Real Estate has said. However, the level of oversupply remains relatively limited as the construction pipeline continues to tighten.
Occupiers took less than 29,000 sq m of space in the third quarter of the year, according to the commercial property agent’s latest quarterly market report, with the average deal size “plunging” from 1,510 to 655 sq m.
John McCartney, director of research at BNP Paribas Real Estate, said with a global slowdown affecting the industry over the past year, “demand has shifted away from tech firms which traditionally have bigger office requirements. Tech accounted for just 8.4 per cent of take-up between July and September – its lowest share since quarterly records began. ”
The other factor driving the decline in office take-up he said is occupiers “taking advantage of remote working to reduce their office space”.
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Vacancy rates have now risen to 12.5 per cent and are now expected to peak at around 16 per cent next year.
But while there is clearly an oversupply of offices relative to demand, shifting market dynamics over the next year or so are likely to lead to a relatively “shallow downswing”, Mr McCartney said.
“Over the last 18 months we have been cautioning that an oversupply situation was coming, and this has proved to be correct,” he said. “However, the construction pipeline has never gotten too far ahead of demand, so peak vacancy is likely to be quite manageable by historical standards.”
It may take longer to return to growth, Mr McCartney said, because remote working has “weakened the relationship between jobs growth and office demand”.
