Dublin cements two-tier office market as vacancies rise

Bisnow/Tim Clark

First quarter Dublin office take-up was SF491K.

A new report has warned of the possible emergence of a two-tier office market in Dublin, with occupants shunning older office space.

The latest research from BNP Paribas Ireland revealed that activity in the first quarter of 2022 was down 50% compared to the last quarter of 2021, with a total of 491K SF taken between January and the end of March.

Two major transactions that closed during the quarter were An Post’s 79K SF at the Exo Building and Finserve’s 69K SF at 10 Hanover Quay.

BNP Paribas said the impact of coronavirus and the war in Ukraine meant occupiers were proceeding “with caution”, hesitating on long-term commitments, which benefits flexible office operators such as Iconic. BNP said attendance is unlikely to reach its 10-year average of around SF2.6 million in 2022.

The BNP also warned that the Dublin office market had developed into a distinct two-tier market, with rents for older buildings “under pressure” due to rising vacancy rates.

“Rents are rising at the top of the market, propelled by the demand for modern, sustainable buildings and the scarcity of such properties.” John McCartney, director and head of research at BNP Paribas Real Estate Ireland.

“However, the increase in vacancy has subtracted competition at the second tier, which has led to more favorable tenant terms for older office space. This will continue to put pressure on returns generated by older buildings. “

BNP also noted evidence that the average lease length had continued to fall, from just over eight years in 2021 to just over six years from data taken for the first quarter of 2022.

The number of deals completed during the quarter in Dublin city center stood at 32, with a further 12 in the suburbs. The highest transaction in value was €60 per SF for One Park Place, Hatch Street in Dublin 2.

Jose C. Birney