The over supply of office space in Dublin could continue until the end of 2026 or start of 2027, new research suggests.
The study by BNP Paribas Real Estate Ireland finds a delay in completing buildings last year has now spilled into this year.
This has led to excess supply in the market which is unlikely to peak until next year, when it hits 16.6% or 250,000 sq m.
The analysis claims the overhang will not be rapidly re-absorbed, because remote working means there is less demand for space.
“Before Covid, every new desk job generated around 10 sq m of office demand. However this figure has plunged by two thirds since Covid,” said John McCartney, Research Director at BNPPRE.
“With only 3.2 sq m now being consumed for each additional job, it is going to take longer than before for the market to digest the vacancy overhang.”
In order for a recovery to kick in earlier than 2027, BNPPRE says there will need to be a rebound in the tech sector, which has contracted in the last year.
Jobs growth will also have to be better than expected, while there will have to be a stronger return to the office by workers, leading to growing demand for space.
The commercial real-estate agency says there is a possibility that the situation could improve more quickly than forecast.
“2023 has been a challenging year for the market with a slowdown in Tech leasing, and the impact of Covid-19 impacting on demand,” said Keith O’Neill, Head of Office Agency at BNPPRE.
“However, activity has palpably picked-up in the opening weeks of this year and a number of large corporate requirements are live in the market.”
The research also finds that Dublin office take-up last year was half of the 2022 figure at 122,951 sq m.
That represents the lowest take-up in space since 2010 and was driven by both fewer deals and smaller average deal sizes.
The analysis also finds that the vacancy rate reached 13.1%.
It also outlines how rent-free periods are increasing and average rents are softening due to the weaker demand and overhang in supply.
ICT accounted for over 50% of take-up between 2019-2021, but this slipped to 21.4% in 2023, the report says.
In absolute terms, only 26,000 sq m was leased to technology firms in 2023, a 54% decline on 2022.