Dublin office vacancy rate ticks up as prime new spaces come on stream 

There were 47 transactions over the three months to the end of September with the average lease size standing at 1,020 sq m.

The office vacancy rate in Dublin rose to 15.7% between July and September despite a surge in new leases agreed compared to the same period last year, a report by BNP Paribas Real Estate (BNPPRE) has found.

The report found that during the quarter, 48,000 sq m of office space was leased in the capital which is 66% higher than the same period last year. 

The total space leased to date this year is 22% ahead of the same period in 2023.

There were 47 transactions over the three months to the end of September with the average lease size standing at 1,020 sq m.

BNPPRE director of research John McCartney said the ongoing improvement in take-up is “an important first step towards a market recovery”.

“However, with a significant pipeline of new space already under construction, vacancy is likely to tick up further in the short-term, keeping pressure on rents.” 

Despite the increased leases agreed, a number of new office buildings came on stream during this period pushing up the overall availability and the vacancy rate.

The vacancy rate increased from 15.2% at the end of June to 15.7% at the end of September.

Rents under pressure

“Dublin’s natural vacancy rate is somewhat higher than the European average meaning that, up to a point, rental growth is less sensitive to vacancy. However, with the vacancy rate now well north of 11%, real rents are under pressure,” the report said.

BNPPRE noted three new office locations in "prime Dublin 2 locations" reached practical completion over the past few months which added to the overall supply.

It added that almost half the last quarter’s take up was grey space — additional space in the office that is leased but not currently in use.

The prime headline rents remain at €673 per sq m per annum — where they have now been for two and a half years. 

“Inflation has slowed significantly but has nonetheless deducted nearly 8% from the purchasing power of money over this period which represents a material reduction in real terms,” the report said.

“Moreover, increased rent-frees and a trend towards earlier lease breaks confirm that market conditions are continuing to favour tenants.”