Prime Dublin city centre rents rose by 9% in the first six months of the year to as high as €62.50 per square foot, new figures from independent property firm HWBC show today.
HWBC's Dublin Office Review for the first half of 2022 said rents rose despite global uncertainty caused by war in Ukraine, rising energy costs and the start of a cycle of interest rate hikes to fight inflation.
HWBC said the strong rebound in appetite for new space that started at the end of last year has continued during the start of this year, with 945,000 square feet of new space let in the period, more than 4.5 times the amount the same time a year ago.
It noted that demand continues to be driven by foreign direct investors, who accounted for four out of the top five deals.
Significant deals in the first half of the year included Service Now pre-leasing 88,000 square feet at the under construction 60 Dawson Street, and Fiserv taking the whole of Kennedy Wilson's 10 Hanover in the South Docks.
But HWBC cautioned that risks to recovery remain, with the sharp share price declines of companies in the technology sector prompting some to review their space requirements.
It said that TikTok has reportedly opted out of plans it had to lease a 177,000 square feet building on Sir John Rogerson's Quay and Twitter is planning to sub-let a floor of its offices on Cumberland Street.
HWBC said it expects any drop off in demand from big tech companies will be taken up by other sectors, with large mandates currently actively from financial and professional services firms.
Global names such as Citi, EY and Deloitte are all actively reviewing office locations, with over 600,000 square feet of requirements between them, it added.
Today's report also said that despite the strong pipeline of demand, the overall Dublin office vacancy rate has increased slightly to 10.6% as occupiers get to grips with the new reality of the hybrid work model.
It added that significant "grey" space continues to come to the market, as companies adjusting their office space to suit hybrid work preferences look to sub-let excess space that is surplus to requirements.
Trends in the suburbs were also positive, HWBC said, with rents gaining 5% this year to €34 per square feet.
Sandyford continues to be the most popular location in terms of tenant activity with Cubic Telecom and NTR taking a combined 40,000 square feet at The Hive in recent weeks.
Iain Sayer, Investment Director at HWBC, said the improvement in the market that started as pandemic restrictions eased at the end of last year has continued into the first half of this year.
"Rent levels have increased and there has been a sharp rise in take up of new space. With strong pipeline demand and healthy levels of reserved space, the second half of 2022 is expected to see similar levels of appetite for the best new city space," Mr Sayer said.
"Although some technology companies are reviewing their pace of growth, we expect to see other sectors such as pharma, life sciences, professional and financial services become more dominant in terms of activity," he added.
