Whether the focus is on houses, rental apartments, warehouses or office blocks, vacancy is critical to property values.
Low vacancy creates competition between occupiers, causing them to bid-up prices and rents. Conversely high vacancy gives occupiers choice, enabling them to beat-down vendors and landlords in property negotiations.
The Central Statistics Office (CSO) calculates Ireland’s residential vacancy rate, but there are currently no official statistics on commercial vacancy.
Consequently, interested parties must rely on data from private sources – generally estate agents. There are two problems with this.
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Firstly, few agencies have the capacity to calculate vacancy rates from first principles. Conceptually, it is straightforward – the vacancy rate is just the ratio of vacant to total space.
But quantifying these two moving parts is difficult in practice. To establish the total space, an exhaustive list of relevant buildings and their floor areas must be developed and maintained over time by adding new-builds and deleting decommissioned and repurposed properties.
Meanwhile, quantifying vacant space requires continuous monitoring of the buildings (and parts thereof) that are available to let. The costs of this research are considerable and therefore many agencies do not do it at all, or cannot do it accurately because of resource constraints.
The second concern is that estate agents have a natural incentive to understate vacancy. For selling agents, a low vacancy rate obviously makes buildings easier to market.
Paradoxically, buy-side agents have an even stronger motive to underestimate vacancy. They only have one shot at getting a commission from each sale and risk missing out if their client’s bid is not the highest.
Given these factors, the commercial vacancy rates reported by estate agents should be viewed as indicative, at best.
[ Dublin office vacancy rate drops for first time in three yearsOpens in new window ]
Recent agency reports agree that about 100,000sq m (119,599sq yd) of office space was taken-up in Dublin over the first six months of 2025.
However, they diverge on vacancy. While some say it has remained broadly static, others claim that the vacancy rate has plunged by as much as 1.7 percentage points since December. Applied to Dublin’s total office stock, this suggests an absolute decline in vacant space of about 72,000sq m (86,111sq yd).
In my opinion, this is implausible. Almost 45,000sq m (53,819sq yd) of new space was added to Dublin’s office stock in the first half of this year.
For vacancy to have fallen as claimed, occupied space in the market would have had to have risen by 117,000sq m (139,931sq yd). That is, 45,000sq m to absorb this net new development, plus a further 72,000sq m to drive vacant space below it starting point.
Against take-up of 100,000sq m, this is just not credible. Take-up is a gross measure of the space that was leased and purchased by owner-occupiers.
However, only a fraction of this typically feeds through to a rise in occupied space. There are two reasons for this.
Firstly, many of the organisations that lease office accommodation are moving within the market. What their lettings add to occupied space is offset by the vacancy they leave behind. The degree of offset depends on the relative size of the buildings they are leaving and entering, with downsizing moves actually subtracting from occupied space in net terms.
Secondly, the reallocation of leased accommodation between tenants boosts take-up but adds nothing to occupied space.
Arrangements like subletting and lease assignment allow tenants who are overstocked with space to offload their surpluses to others. Because this space was occupied (leased and rent-producing) before and after the offload there is no impact on occupied space; only the tenant’s identity changes.
Dublin’s three biggest office lettings in H1 were moves within the market, and two of these were lease assignments.
Unfortunately, this has become typical and is unlikely to change given the global economic and political situation. With elevated uncertainty, and with increased barriers to foreign investment and trade, the flow of new entrants to Dublin’s office market is likely to be slower than before now, meaning that moves will account for a bigger share of office leasing deals.
Moreover, with uncertainty militating against expansions, and with organisations still adjusting their office space to reflect remote working, we can expect more of these moves to be downsizings.
Agents will plead that timing and methodological nuances explain the data inconsistencies highlighted herein.
But the big picture is that Dublin’s office market is more distressed than agency reports reflect. Despite the tailwind of full employment, and the bonus of Workday’s 38,700sq m (46,285sq yd) mega-letting, take-up in the first half of the year remained below its long-term average.
Compounding lacklustre leasing momentum, hybrid working and macroeconomic uncertainty have altered the composition of lettings, slowing the rate at which take-up is adding to occupied space.
Finally, after considerable deliveries in H1, even more new office supply is scheduled for the second half. These factors make it likely that Dublin’s office vacancy rate will end 2025 higher than it started the year.
Commercial property markets are intrinsically cyclical, meaning a recovery will always come, eventually.
Office development will slow next year, perhaps allowing vacancy to finally begin receding. However the pace of digestion is likely to be sluggish, and vacancy will be retreating from a starting point well above that which is historically associated with rental growth.
After several difficult years, office agents understandably want to call a recovery in rents, but it is premature to do so.
Dr John McCartney lectures in property economics at TU Dublin and is Adjunct Associate Professor at UCD
