Dublin office vacancy rate hits lowest level in 20 years

Robust demand coupled with a major contraction in the volume of immediately available supply has driven the vacancy rate in the Dublin office market to below 10 per cent for the first time in 20 years.

That’s the key finding in the latest report on the sector from agent Cushman & Wakefield.

As the take-up of offices in the capital continues to be propelled by global tech giants such as Google, Amazon and Intercom, the percentage of available space dipped to 8.4 per cent at the end of December 2019. The rate of vacancy is even more acute at just 4.7 per cent once signed and reserved office space is factored in to the calculations. And within Dublin's central business district (CBD), the vacancy levels are lower yet again, at just 2.7 per cent.

Commenting on the numbers, Kate English, senior economist in Cushman & Wakefield’s research division said: “The marked decline in availability of standing stock is a combination of a number of factors. Most obvious is take up; however, we have also seen a very clear slowdown in the release of second-hand space to market, essentially market churn. Just 2 per cent of availability at the end of the final quarter in 2019 was standing stock space released back on to the market, versus a quarterly average of 8 per cent in 2018 and 13 per cent in 2017.”

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Significant deals

In terms of take up, some 238,150sq m of space (2,563,425sq ft) of space was occupied in 2019. To put that figure in perspective, it comes in at over 50 per cent above Dublin’s long-run annual market average. It also marks the sixth consecutive year in which take up has surpassed the 200,000sq m mark.

Setting the marker for the year ahead, 2019 ended with several pre-lets of space under construction. Among the more significant deals signed were Amazon’s pre-let of 15,500sq m (166,840sq ft) at the McGarrell Reilly Group’s Charlemont Square scheme in Dublin 2, and American software company, Intercom’s pre-let of 10,300sq m (110,868sq ft) at Irish Life’s Cadenza development at Earlsfort Terrace, Dublin 2. All told, Cushman & Wakefield estimates that 55 per cent of the space now under construction is pre-let or reserved, illustrating the demand for space in Dublin.

While the level of office space available to meet the immediate requirements of prospective occupiers has fallen, a spillover of developments which had been due for delivery in 2019 will serve to push the volume of completions to 308,900sq m (3,324,972sq ft) this year. Construction activity meanwhile continues to rise with 586,400sq m (6,311,957sq ft) under development at the end of December 2019.

Demand

Looking at the prospects for the office market in 2020, Cushman & Wakefield say they expect the tech sector to lead the demand for space once more, along with professional services and finance occupiers. As a consequence, they believe prime rents will climb from the €673 per sq m recorded in 2019 to €684 per sq m by the end of this year.

Commenting on the overall outlook for this year, Ronan Corbett, head of offices at Cushman & Wakefield said: “A key driver of the market, occupier demand, remains extremely robust with over 3.9 million sq ft of active, unsatisfied demand as of January. This is hardly surprising given Dublin’s elevation over the last five years as a true international business location from both a European and global perspective.”