The vacancy rate in Dublin office space dropped for the first time in three years in a “material milestone” for the sector, according to a report from commercial real estate adviser CBRE.
The second quarter of the year saw the vacancy rate fall from 19.3 per cent in the first quarter to just over 17 per cent, with the conclusion of 12 consecutive quarterly increases in the vacancy rate coming to an end.
That streak saw the vacancy rate grow from just over 8 per cent in the second quarter of 2022 to nearly 20 per cent at the start of this year amid the rise of working from home and construction of new blocks.
The data is skewed by the closing of the single largest commercial office space letting deal since 2018. Despite originally selecting its new HQ at College Square in late 2024, Workday just completed the signing of the 20-year lease for the 38,662 square metre (sq m) property in the past three months.
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Another big deal helped to carry the quarter, at 70 St Stephen’s Green in which Vodafone has agreed to take 5,855 sq m of the property from US pharmaceuticals group, Horizon Therapeutics.
These two deals brought up the average deal size to 1,825 sq m and were the only deals be completed above the mark. Indeed, the completions of the deals mean that 75 per cent of all space taken up in the period was the high-quality Grade A+ office space and that active office space demand has now fallen by 18 per cent.
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The CBRE report notes that despite the reduction in the headline vacancy rate, this is “not reflective of the reality of available space in the core city centre locations”.
With an historical average of nearly 240,000 sq m of annual take-up, there is just 84,000 sq m of BER A-rated space currently available to lease in Dublin 2 which the report noted is “quite fragmented across a number of buildings”.
CBRE said total take-up in the quarter stood at 60,540 sq m of space, the highest in a year, though the two big deals account for more than 44,500 of that total, more than 75 per cent of overall take-up.
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No office spaces completed construction in the period, with just 35,000 sq m of office space in the pipeline expected to hit the market this year, including the spaces at 2 Grand Canal Quay and Google’s Boland’s Bakery.
As Dublin’s total office market stock is on the brink of hitting five million sq m, rental prices remain largely static for the highest quality office spaces at €673 per square metre with the report forecasting a rise in price to €700 per square metre later in the year.
That price, CBRE said, will have to exceed €755 psm before construction of office spaces will recommence in Dublin.
