Over 12% of offices in Dublin were empty during the last three months of last year, as the tech slowdown, remote working and a glut of fresh completions weighed on the market.
That represents an increase of 2.4% from the previous quarter, according to a new analysis from BNP Paribas Real Estate (BNPRE).
The analysis forecasts that the vacancy rate will climb further this year, topping out at around 15% later in 2023 or early next year.
"With a further 230,000 sq m scheduled for completion in 2023 and with a sluggish global economy slowing the speed at which this can be absorbed, we believe that the vacancy will peak at around 15% by year-end," said Dr John McCartney, director of research at BNPPRE.
The agency attributes the growth in empty office properties in the capital last year to a range of factors.
It says sub-letting and churn were increased features, while new completions hit the strongest level since 2008.
It predicts that completions will continue to be strong during the course of this year before maxing out.
Remote working and the tech slowdown will also add to the increases in vacancy rates, it says, with leasing by tech firms accounting for just 11.7% of take-up in the second half of last year compared with nearly 50% between 2017 and 2021.
"Remote working is causing office take-up to lag service sector employment growth," said Dr McCartney.
"In addition, the continued tech sector slowdown will drag on the quantity and quality of lettings."
"Increased sub-letting and 'churn' reduced the extent to which gross take-up fed through to an increase in tenanted space during 2022, and this trend will continue in 2023," he said.
As a result, BNPRE expects that the high level of vacancies will provide opportunities for would-be tenants.
This will give rise, it says, to increased incentives such as rent free periods.
The report predicts, though, that the peak in construction will be modest enough to keep vacancy levels manageable with the overhang absorbed into next year as the economy improves again.
In total just under 248,000 sq m of Dublin office space was taken-up last year, making it the busiest year since 2019.
The strongest demand came from sectors such as financial services, aircraft leasing and professional services firms.