- Deferred completions from 2021 will boost Dublin office supply this year.
- 2022 set to be the strongest year for completions since the Global Financial Crisis.
- Leasing activity recovering. But employers slower to sign as they work through their post-pandemic occupational strategies.
- Additional supply may not be fully absorbed in 2022. Vacant stock will provide opportunities for tenants.
- Widespread growth in rents not expected before 2024.
- Widening gap between new and older buildings as occupiers focus on environmental performance. This may lead to a premium for brand new stock.
- Rents to remain resilient for best-in-class energy efficient buildings in prime locations
A new report by property consultants BNP Paribas Real Estate Ireland (BNPPRE) says there will be no material reduction in Dublin office vacancy this year, and a recovery in average rents is unlikely before 2024.
BNPPRE notes that the suspension of construction works between January and May last year delayed the completion of several large offices from late 2021 into the first half of 2022. By adding to the pipeline of stock that was already scheduled to complete this year, this will make 2022 the biggest year for new office delivery since the Global Financial Crisis. According to BNPPRE around 450,000 sq m of space is currently under construction in Dublin. Approximately 240,000 sq m of this space is scheduled for 2022 delivery.
Keith O’Neill, Director of Office Agency at BNPPRE, says that office leasing has picked-up from historic lows this time last year, and notes that around 75,000 sq m of space is already reserved. However corporate tenants have become slower to commit to leases as they work through their occupational strategies for a post-Covid world.
Because of this John McCartney, Director of Research at BNPPRE, cautions that demand might not be enough to absorb all the new space coming on-stream.
“Due the strong construction pipeline we expect Dublin’s office stock to rise by over 200,000 sq m in 2022. Ordinarily, lettings of over 300,000 sq m would be needed to absorb this extra stock. This is because the tenants who lease space are often moving out of existing accommodation, leaving vacancy behind.”
“Approximately 155,000 sq m of office space was leased in Dublin during 2021. Despite the improving trend, occupier caution about the return to offices means that it will be challenging for this figure to double in 2022. As a result we don’t expect vacancy to tighten this year.”
The report notes that average rents usually only pick-up 12 months after vacancy rates start to contract. On this basis BNPPRE does not envisage a widespread recovery in office rents before 2024. However BNPPRE says that global organisations are now demanding offices with the highest standards of environmental performance. Consequently vacant older stock is increasingly irrelevant to the best buildings which should outperform.
John McCartney, Director of Research, BNP Paribas Real Estate
Ms. Ellen Browne, BNP Paribas Real Estate