A rebound in Dublin office leasing could mean the impact of remote working on the market is weakening as take-up surged to the highest level in 2½ years in the three months to the end of June.
In its latest office market report, the commercial property broker BNP Paribas Real Estate said organisations signed up for 86,250sq m of space in the second quarter. For the first time in six quarters take-up surpassed the 10-year second-quarter average of 60,000sq m, BNP said.
Still, the vacancy rate remains elevated and rising, according to the report, because of an oversupply of new properties coming to market relative to demand, which has been weakened by the rise of remote and hybrid working. Job cuts and the resulting pullback from the tech sector, typically the biggest driver of office demand in Dublin, also hampered the market last year.
John McCartney, director of research at BNP Paribas Real Estate, said demand conditions were as good as can be expected against a backdrop of weak tech sector take-up but the most important factors were on the supply side.
“Nearly 140,000sq m of new stock has been added in the first half of 2024 and a further 17 buildings, incorporating 250,000sq m, are scheduled to complete before the end of next year,” he said. “This is a lot of space for a small market like Dublin to digest, and vacancy will therefore rise further despite the leasing cycle having probably now passed rock bottom.”
Despite the relative oversupply of available properties prime rents have held steady at €673 per sq m per year over the last two years. Yet general price inflation has “eroded 8.5 per cent of the real value” to landlords, meaning better value for tenants in real terms. “Further hidden signs of a tenants’ market include shortening lease terms, earlier break options and increasing rent-free periods at the start of leases,” BNP said.
Overall the rebound in leasing activity suggests an improvement in occupier confidence and “an easing of the remote working headwind”, said Keith O’Neill, executive director and head of office agency at BNP Paribas Real Estate. “June’s interest rate cut and a general strengthening of the economy have led to a noticeable improvement in sentiment. But hybrid workers are also coming into the office more often which, as well as driving office demand, is creating more vibrancy around town.”
Published last week, research from JLL Ireland revealed that leasing activity more than doubled in the second quarter over the same period last year.
The largest deal in the period involved payments group Stripe, which signed for 156,000sq ft (14,492sq m) of office space at Wilton Park One.
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