The commercial property market in Dublin is facing significant challenges, and according to a recent report from BNP Paribas Real Estate (BNPPRE) Ireland, is predicted to hit its bottom in 2024 with a 16 per cent vacancy rate. The report highlights a sharp decline in office space demand in the capital; in the third quarter of 2022, just under 29,000sq m (312,150sq ft) of space was leased, representing a 63 per cent drop from the previous year.
However, Dr John McCartney, director and head of research at BNPPRE, remains calm in the face of media excitement in the wake of the report – perhaps because he has been warning about this coming for quite some time.
He points out that we don’t need to get back to zero: 11 per cent is a “comfortable” vacancy rate, acting as the tipping point between positive and negative rental growth.
“The difference between 16 per cent and 11 per cent, in absolute terms, is about 220,000sq m of excess space. If we compare that to where we were in 2010, for example, when the market got to bottom dead centre during that cycle, there was about 430,000sq m of surplus space.”
The construction pipeline
Development decisions made pre-pandemic are now coming to fruition, with more than 216,000sq m (2.32 million sq ft) of office space expected to be completed in 2023, further exacerbating the oversupply issue.
“There’s a long lead time on the delivery of space, and the risk for anybody that’s involved in commercial development is that demand can evaporate in an instant,” says McCartney. In recent years he has seen available funding curtailed “except in the circumstances where a pre-let was already