Prime office rents in Dublin rise in first six months even as vacancy rate edges up

Technology companies’ demand for Dublin offices is waning, but a new report shows finance and professional services are poised to plug any gaps that emerge.

Rents for prime city centre space in the capital climbed 9 per cent to “as high as €62.50 a sq ft” in the first six months of the year, according to letting agent HWBC’s Dublin Office Review for the first half of 2022.

The rebound followed a strong appetite for offices in the city that materialised as Covid restrictions eased in the final three months of 2021, the property firm’s report notes.

However, it points out that tech companies are reviewing their space needs, partly because their shares have weakened through this year.

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The Irish Times last month confirmed that Chinese social media behemoth TikTok had ended talks to lease space at Marlet Property Group’s Shipping Office scheme on Sir John Rogerson’s Quay.

TikTok announced a review of its business earlier this year. However, it is going ahead with an agreements to rent Iput’s Tropical Fruit and Mapletree’s Sorting Office buildings.

Meanwhile, another social media name, Twitter, is considering subletting a floor of its office on Cumberland Street.

HWBC says other businesses are likely to step in to replace any fall in demand from tech companies.

“There are numerous large mandates currently active in the market from financial and professional service firms,” the report states. “Global names such as Citi, EY and Deloitte are all actively reviewing office locations with over 600,000 sq ft (5,600 sq m) of requirements between them.”

Overall, demand for Dublin offices remained strong in the first half of the year, despite rising energy costs and interest rates, and geopolitical tension, including the war in Ukraine, HWBC says.

By the end of June, businesses had agreed to rent 945,000 sq ft of space in the capital, with a further one million square feet reserved and in various stages of “deal completion”.

Top deals in the first half included Service Now’s agreement to take 88,000 sq ft at 60 Dawson Street, An Post taking 78,500 sq ft in the Exo Building on the north docks and Fiserv opting for 68,250 sq ft at 10 Hanover in the south docks.

In the suburbs, Cubic Telecom took 30,000 sq ft in the Hive, Sandyford, to allow for expansion and relocation from Corrig Court. Renewable energy investor, NTR, took 10,000 sq ft on the first floor of the same building.

Suburban rents also grew, increasing 5 per cent this year to €34/sq ft, says HWBC. Rates in Sandyford-Leopardstown are particularly strong as there has been little new development there since the pandemic, so space is limited.

Iain Sayer, the firm’s investment director, said last year’s post-pandemic improvement continued into the first half of 2022.

“Rent levels have increased and there has been a sharp rise in take up of new space,” he added.

Paul Scannell, head of offices, noted there was an “ever-widening gap” between older, less energy-efficient buildings and newer structures.

“Higher energy costs will also likely accelerate the trend towards buildings that leverage new construction techniques to reduce energy consumption,” he predicted.

Newer buildings with the best sustainability credentials are commanding premium rents compared to older, less energy-efficient offices, his firm maintains.

Despite growing future demand, the overall vacancy rate ticked up slightly to 10.6 per cent as employers got to grips with “hybrid working”. HWBC says there continues to be significant “grey space” on the market, as companies adjust their requirements to suit this trend and seek to sublet room that they do not need.