Commercial Real Estate News
Ireland Office Market Making a Comeback in 2023
According to new research from JLL, post a global pandemic, Ireland's office market witnessed robust leasing activity, with 408,000 sq. ft. of office space transacted through 54 deals, representing a notable growth in volumes of 49.5% quarter-on-quarter.
There has been a 28.6% increase in the number of deals compared to Q1 2023 and 35.3% above the twelve-quarter average. The market is active after surpassing the ten-year H1 average of the number of deals transacted by 6.1%. A new trend has emerged, with the average deal size decreasing by 41.6% in H1 2023 compared to the pre-pandemic ten-year average, this shift reflects adaptive occupier behaviours in response to global changes.
Conor Fitzpatrick, Director of Office Agency said, "The dynamics of the market continue to evolve, but the increased number of inspections indicate that at least some occupiers are settling on what their future spatial requirements are likely to be."
The public administration sector emerged as the most active sector in Q2 2023, capturing 21% of the market share. This is significantly higher than the sector's five-year average market share of 9%. Concurrently, despite facing turbulence towards the end of 2022, the tech sector remained the most active, accounting for 25% of leasing volumes for H1 2023. However, its volume share declined from the five-year annual average of 45%.
Sublease and assignment space constituted 23% of take-up in Q2 2023, surpassing the five-year volumes, averaging 17.5% of the market. Greyspace has notably emerged as a prominent feature within the Dublin market in 2023, accounting for 28.6% of the vacant space. In Q1 2023, the volume of grey space reached a record level of 1.97 million sq. ft. but slightly reduced to 1.92 million sq. ft. in Q2 2023. Dublin 2 and Dublin 4 sub-locations contain the majority of grey space, with 628,000 sq. ft. and 549,000 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.
Headline rents remain elevated at a record level of €65 per sq. ft. even as economic conditions have created an occupier favourable market with the vacancy rate at 14.1%.
There is a bifurcation in the market, where buildings that achieve the highest ESG credential are in high demand as opposed to the increasingly obsolete stock in the Dublin market that is becoming increasingly more challenging to lease. The construction pipeline for new buildings is dwindling, and no buildings are due for completion after 2025 that are not already pre-let.
Niall Gargan, Head of Research for JLL Ireland also commented, "As office construction experiences its sharpest decline since the aftermath of the global financial crisis, the supply of 'green buildings' will be significantly diminished. As office lease agreements come to an end, occupiers will face challenges in securing office spaces that align with their environmental goals. The scarcity of suitable options will result in many paying a premium to meet their sustainability targets. Some of Dublin's employers, such as Deloitte, KPMG, and EY, understand this and have moved quickly to secure their long-term homes well in advance of their 2025/2026 lease events."
