The Dublin office rental market recovered strongly in 2022 after the Covid-19 pandemic significantly impacted the take-up of space in the previous year.
According to an analysis by Savills Ireland, the take-up of office space reached 2.6 million square feet for the full year.
That was in line with the five-year average take-up of space and was 70% higher than the full-year 2021.
The average deal size, which fell sharply in 2021 to a low of 7,500 square feet, steadily increased and finished the year at 13,000 square feet of space.
The city centre was the focus of both take-up and construction activity, the report notes.
All of the top ten deals took place in either Dublin 1 or Dublin 2, Savills noted.
"Prime rental levels now stand at €62.50 per square foot, which was the same as the previous peak in 2007. However, when adjusted for inflation to reflect real rental levels - which is what counts - rents are 14% lower or the equivalent of €53.50 per square foot - in 2007 terms," John Ring, Director of Research at Savills explained.
"By contrast, construction costs grew by 45% over the same period. The cut in real rents should be acknowledged in relation to the discussion on rental movements over the next year. Higher construction costs as a result of the implementation of ESG standards will also feed into this dynamic, notwithstanding the greater grey space in the market," he added.
Mr Ring said the office market would face challenges ahead given the uncertain global macroeconomic environment, with the first half of the year expected to be the most demanding.
However, slowing inflation levels across the US and Europe have fed expectations that inflation may have peaked.
"As inflation eases, and interest rate expectations are tempered, we can expect the tech sector to return to leasing activity," he said.
The expansion of the tech sector in Dublin over the last decade has been one of the office market's most dominant trends, the report notes, adding that the sector remains in a strong position, despite recent negative sentiment.