The completion of eight new schemes this year will drive the vacancy rate in Dublin’s office market higher despite a recovery in demand for space in recent months, according to a new report from Knight Frank.
Vacancy levels in the city hit 15.9 per cent in the three months to the end of June, the commercial property agent said in its latest office market report on Monday, up just one percentage point from the end of the first quarter.
Demand for space had been weakened by the rise of remote and hybrid working while a pullback from the tech sector, typically the biggest driver of office demand in Dublin, also hampered the market last year.
However, a “considerable bounce” in take-up levels was evident during the second quarter with the vast majority of companies that signed deals taking larger spaces than they previously occupied, Knight Frank said. Highlights included Stripe’s decision to take almost 14,500sq m at One Wilton Park in Dublin 2 and BNY signing for some 7,331sq m at the Shipping Office on Sir John Rogerson’s Quay.
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The State, meanwhile, was responsible for the biggest deal of the quarter with the Health Service Executive signing for close to 17,000sq m at the Seamark Building in Dublin 4.
“At midyear, there is increasing evidence that the occupier market has turned a corner with a recovery in demand well under way,” Knight Frank said. “The 2024 delivery pipeline is now the only component actively putting pressure on the vacancy rate.”
A “significant proportion” of this new available space completed in the second quarter was made up of a small number of large schemes, the report authors said, with Marlet’s College Square development and Building Two at Kennedy Wilson’s Cooper’s Cross on Mayor Street in Dublin 1 – both of which are currently available – accounting for 10 per cent of total vacancy in the market.
Some 300,000sq ft of additional new space which is not currently pre-let is due to complete in the second half of the year and “will put some further upward pressure on the overall vacancy rate, which we forecast will peak by year-end and decline into 2025 as the development pipeline tightens”, said Joan Henry, chief economist and director of research at Knight Frank Ireland. “There is no new office space due to complete after 2026.”
Despite this downward pressure on pricing, prime rent yields have remained steady at between 5 per cent and 5.25 per cent, according to the report. Upward pressure on rents is expected in 2025 driven by a combination of cost pressures and increased demand, Ms Henry said.
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