Caution and smaller deal sizes combined to bring total Dublin office market take-up to 1,382,000 sq. ft. in 2023 – the midpoint of Knight Frank’s forecast range at the beginning of the year.
A number of larger deals are expected to close in 2024, driven by requirements from Professional Services companies. The TMT sector (which took the largest proportion of total space in 2023) will remain active as will the State and Financial Services sector. While it is early in the year to predict with certainty, Knight Frank expect total letting activity to be stronger in 2024, in a range of 1.5m –2m sq. ft.
The overall market vacancy rate has increased to 14.4% from 14.3%. The withdrawal of some buildings for redevelopment or re-use combined with completion delays limited upward pressure on the overall vacancy rate. Given the ongoing anomaly of grey space (which has now plateaued), and a high level of completions in 2024, the overall vacancy rate will edge up again by mid-year.
Beyond 2024, the delivery pipeline tightens considerably and the vacancy rate
will fall.
Sustainable agendas, along with strategic workplace requirements, will keep occupiers focused on acquiring the best space, with an increase in the amount of lower energy-rated space being withdrawn from the market for redevelopment/re-use.
Prime headline rents ended the year at €62.50 psf and are expected to remain at this level until mid-2024. Enhanced incentives and rent-free terms will remain a feature this year.
Investor caution, and a lack of prime assets available to the market combined to result in the lowest level of investment in office assets for ten years, (€385.4m for 2023 as a whole). This mirrors what has been happening in all major European cities.
Some assets of scale are expected to come to the city centre market in 2024 and office investment volumes are expected to be considerably stronger.
Joan Henry, Chief Economist & Head of Research, Knight Frank Ireland