A new report points to a two-tier market for Dublin office space with take-up in general remaining well down on historical averages.
The latest BNP Paribas Real Estate Ireland report shows that rents for brand new, high-spec buildings in prime locations are now rising again, having been temporarily set-back by Covid-19.
But increasing vacancy is dragging on older buildings which represent the majority of Dublin's office stock.
BNP Paribas said that as a result, average rents and lease terms are moving in favour of tenants.
Today's report notes that 45,600 square metre of office space was leased in the first quarter of 2022 - a near ten-fold improvement on the same time last year when activity was very weak due to Covid-19 restrictions.
BNP Paribas said that while the overall trend is improving, office take-up rates remain well down on historical averages.
But today's report also reveals a surge in office building activity.
Over 100,000 square metre of new space has already been delivered since January and around 240,000 sq m is expected in the full year. This will make 2022 the biggest year for Dublin office completions since 2008.
Despite surging supply and below-average demand, today's report also says that says prime rents are rising.
"Occupier demand is concentrated on new, sustainable offices with the relevant environmental accreditations. Because there are relatively few of these buildings, prime headline rents are edging-up, and we expect more growth as the year progresses," Keith O'Neill, Director of Office Agency at BNP said.
John McCartney, Director of Research at BNPPRE, said it is challenging for firms to define their long-term business space needs at the moment.
"Many are in the process of developing remote-working policies which will ultimately impact on their real estate strategies. Meanwhile they are facing increased uncertainty from the Ukraine war, the ongoing Coronavirus threat, rampant inflation and rising interest rates," Mr McCartney said.
"In this context it is no surprise that organisations are taking their time before committing to binding lease contracts," he added.