Office Leasing in Dublin Hit its Lowest Quarterly Levels Since 2013
A sharp rise in occupiers reserving space signals that activity will pick up in the latter half of 2024
The latest research from JLL Ireland, tracking Dublin’s office market in Q1 2024, shows that there have been low levels of leasing activity in the opening quarter, with 196,000 sq. ft across 31 deals.
The volume of space is down 44% on the previous quarter and 63% below the five-year quarterly average. Additionally, the average deal size has fallen to 6,346 sq. ft., a decline of 56% from the pre-pandemic five-year annual average. Outside of the pandemic years in 2020 and 2021, this is the lowest quarterly volume of space leased since 2013.
Despite the subdued leasing activity in the year's opening quarter, occupiers have been active, with the volume of space being reserved standing at 800,000 sq. ft. This is an increase quarter-on-quarter of 35.8%, and it is 20% above the average quarterly reserved space in 2023. The sharp rise in reserved space indicates that the cycle is likely near its bottom.
Vacant space has increased in the market and now stands at 7.3m sq. ft or a vacancy rate of 15.4%, up from 14.9% the previous quarter. When the vacancy rate strips out Grade B and Grade C vacancies, space that is at risk of being functionally obsolete by 2030, and views the market through the scope of Grade A+/A space, the vacancy rate is 7.8%.
Sublease and assignment space, known as ‘grey space’, is a significant factor in Dublin’s 7.3m sq. ft vacancy. Grey space has reached a record high of 2.3m sq. ft (increasing 18% year-on-year), but it is anticipated that this volume of space will decline as the year progresses. Anecdotally, a number of occupiers have expressed that they will likely take their grey space off the market as greater visibility emerges on the economy and an uptick in employees returning to the office.
Dublin 2 and Dublin 4 sub-locations contain the majority of grey space, with 885,000 sq. ft. and 500,000 sq. ft., respectively. Notable buildings with available grey space include Fibonacci Square in Ballsbridge, One Park Place on Hatch Street, and the remaining space at Cadenza on Earlsfort Terrace.
Despite an increase in Dublin's vacancy rate, the flight to quality has led to strong demand for top-tier properties. A recent research report from JLL Ireland noted, that if buildings are not upgraded to future-proof, it is estimated that 61% of the Dublin office market will become functionally obsolete by 2030.
Niall Gargan, Head of Research for JLL Ireland, said, “Demand for sustainable, low carbon space is growing; however, our research shows that supply will struggle to keep pace without increased levels of retrofitting. In Dublin, this will become an acute problem by 2027 when the pipeline of new deliverable space will become non-existent, and only 39% of the market will be able to function in a future where high sustainability standards will be the norm.”
“The state of play is clear: corporate occupiers must show proof of progress in their commitment to operate more sustainably, and buildings need to catch up. More companies are rapidly committing to carbon reduction goals, many of which are through the Science Based Targets initiative (SBTi), which has over 7,600 corporate signatories. Over 80% of signatories have joined in the past two years alone. As the buildings they occupy typically fall under their scope 1 and scope 2 emissions, these commitments have direct implications for how businesses operate and lease spaces.”