Dublin office leasing hits lowest quarterly levels in over a decade

The Dublin office market has recorded a slump in activity in the first quarter of 2024, with the volume of space 63% below the five-year quarterly average and down by 44% on the previous quarter. Take-up reached 196,000 sq ft across 31 deals in Q1 2024, according to new research from JLL Ireland. It is the lowest quarterly volume of space leased since 2013, excluding the pandemic years in 2020 and 2021. This lull was also reflected in the average deal size, which has dropped to 6,346 sq ft in the city – a 56% decline from the pre-pandemic five-year annual average. Vacant space rose from 14.9% the previous quarter to 15.4% in Q1, which equalled 7.3m sq ft. This is concentrated on older, secondary and tertiary office stock with poor ESG credentials putting it at risk of obsolescence by 2030. With this excluded, the vacancy rate drops to 7.8% for grade-A space. A significant part of the vacancy is made up of grey space, as sublease and assignment space reached a record high of 2.3m sq ft, an 18% year-on-year increase, However, JLL anticipates the amount of grey space will lessen by the end of the year, with occupiers expressing interest in taking it up when the economy stabilises and hybrid working practices are firmly established. The majority of grey space is located in Dublin 2 and Dublin 4, with 885,000 sq ft and 500,000 sq ft, respectively. This can be found in buildings including, Fibonacci Square in Ballsbridge, One Park Place on Hatch Street, and the remaining space at Cadenza on Earlsfort Terrace. Despite the dip in leasing activity, the amount space in negotiations or under offer has risen, with 800,000 sq ft being reserved. This is 20% above the average quarterly reserved space in 2023 and is an increase quarter-on-quarter of 35.8%. JLL estimates that 61% of the Dublin office market will become functionally obsolete by 2030 if improvements are not made to  sub-par office stock. Niall Gargan, head of research at 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.” He added: “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, 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.” Image © imageBROKER/Shutterstock