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Q3 2022 Dublin Office Market Report Released

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The Dublin office market exceeded expectations in Q3 with take-up reaching 858,918 sq. ft. across 58 lettings. This brings take-up for the first nine months of the year to over 1.8 million sq. ft. – already above annual totals for both 2020 and 2021.

The largest letting of the quarter was a pre-let which saw A&L Goodbody commit to a new 155,000 sq. ft. HQ at 25 North Wall Quay, which is currently being redeveloped by IPUT. On completion in 2024, the building will be 36% larger and aims to be Ireland’s lowest carbon office development. A&L Goodbody signed a separate lease for 62,674 sq. ft. across three floors at 3 Dublin Landings, which will serve as their temporary home during the construction phase. The second largest deal involved TikTok leasing the Tropical Fruit Warehouse on Sir John Rogerson’s Quay. TikTok will occupy the entire building, extending to 83,183 sq. ft. on a 15-year lease.

As expected, there has been continued growth in take-up among professional and financial services companies which accounted for 38% and 14% of Q3 take-up respectively. This is a factor of increased activity among banking, investment, legal and consultancy companies seeking to move into high-quality buildings which reflect their ESG policies and targets. By contrast, the TMT (technology, multimedia & telecommunications) sector’s share of take-up continued to fall in Q3, standing at 13% compared with 34% last quarter and 56% in Q1.

Prime rents are stable at €62.50 to €65 per sq. ft., although evidence is emerging above this level in certain cases. Overall vacancy increased slightly to 11.5%, falling to 10.2% when reserved space is excluded. The highest vacancy continues to be seen in the suburbs, where 13.6% of space was available at the end of Q3, or 12.5% excluding reserved space. Vacancy in the city centre was lower at 10.4%, or 8.8% excluding reserved space. The level of vacancy was impacted in part by the delivery of new buildings including One Charlemont Square and 20 Kildare Street in Q3, although several lettings have been completed or are in progress in relation to both.

Sustainability is now critical in occupier decision-making processes, and many companies cannot consider leasing an office building that does not meet their ESG targets and policies. With the gap in demand and rental levels between newer and older buildings growing, several planning applications were submitted in Q3 involving the redevelopment of major office schemes across the city. These include Blackstone’s 25-31 Adelaide Road, Irish Life’s Stephen Court on St. Stephen’s Green and two separate applications by entities linked with Clancourt Group in relation to Blocks 1 and 9 Harcourt Centre. Under the Draft Development Plans, developers are being encouraged to reuse and repurpose older buildings, where possible, and will soon be obligated to provide a rationale for demolition having regard to the embodied carbon of existing buildings as well as the additional use of resources and energy arising from new construction. This may serve to slow down new development somewhat, although with over 3 million sq. ft. due for delivery this year alone (of which 68% pre-committed), this may not be such a bad thing.

Flexibility is also a key consideration and demand for serviced office space is strong. Occupiers are attracted by the potential for minimal fit-out costs and reduced lead time. Iconic Offices expanded again in Q3, taking 12,852 sq. ft. across two floors at Scotch House, Dublin 2. IPUT are planning to launch new locations for their flex brand too, further highlighting the attractiveness and growth potential of the flex model.

Geopolitical turbulence has driven surging inflation and supply chain issues, which have translated into significantly higher construction costs. This is having a knock-on effect on occupiers in terms of rents and fit-out costs, driving increased enquiries for fully fitted, ‘plug and play’ office space. Sentiment has been negatively impacted and this may mean certain occupiers adopt a ‘wait-and-see’ approach, although some have been in this phase since early 2020 and may need to move anyway. At the end of Q3, 773,000 sq. ft. was reserved and active requirements were at 2.5 million sq. ft. which is encouraging. Despite take-up evidence pointing to a healthy office market, many companies (particularly in the TMT sector) are struggling to convince employees to return to the office and we are now starting to see existing space requirements being revised downwards. Certain companies are seeking to offload excess space, so the level of quality ‘grey space’ coming back to the market is accelerating and we expect this trend to continue into 2023.


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Q3 2022 Dublin Office Market Report Released

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Kate Ryan

Director | Head of Research

Dublin

Kate is Head of Research for Colliers in Ireland. Kate's role involves tracking and analysing property market data and trends and producing market reports and commentaries across all sectors. Kate is also part of Colliers EMEA research team and provides Irish market data which feeds into EMEA reports, allowing for analysis and comparison of occupier and investment trends.

Kate is an Associate Member of the SCSI and holds an MSc in Real Estate from TU Dublin. 

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Paul Finucane

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Paul  has over 19 years in years experience in the commercial property sector and joined the Colliers team in  2004 folllowing a 3 year period at Allied Irish Bank Plc. He is joint head of the offices department in Dublin  and specialises in the acquisition of office space for incoming  multi-national companies. 

In 2019, Paul acted for LinkedIn in the largest office transaction of the year where they pre-let 3 office blocks in the CBD as part of their long term expansion plans in Dublin. This success has continued into 2020 where Paul acted for Slack in the largest city centre acquiistion year to date on behalf of Slack Technologies. 

Paul is a licensed professional and a full member of the Society of Chartered Surveyors Ireland (SCSI) and Royal Institute of Chartered Surveyors (RICS)

 

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Nick Coveney

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