Accounts of Dublin’s office market have become increasingly polarised. Take-up has strengthened, and industry sources say vacancy is dropping and rents are trending up. However, independent observers are painting an altogether less positive picture.
Last August, I expressed scepticism about the reported plunge in office vacancy rates during the first half of 2025.
Vacancy rates can only fall if occupied space rises faster than the total office stock. Considering all the moving parts – take-up, subleasing and churn within the lettings mix, new building completions and deletions – a sharp decline seemed implausible.
A subsequent Central Bank of Ireland report reinforced this view. Utilising information on scheduled lease expiries from the commercial leases register, the bank’s economists predicted that Dublin’s office vacancy rate would peak at 19.1 per cent this year – half a percentage point above its 2024 level.
READ MORE
Even at pre-Covid occupational densities this would represent enough vacant space to accommodate almost 90,000 employees, which is about the number of tech workers currently in Dublin.
Figures from specialist data provider MSCI cast further doubt on the plummeting vacancy narrative. The vacancy rate on its institutionally-owned portfolio of central Dublin offices has been trending up steeply since Covid, and rose from 13.1 to 17.3 per cent during 2025.
With uncertainty around the headline figure, the emphasis of much recent commentary has shifted to Grade-A vacancy.
The argument is that modern occupiers strongly favour high-spec, energy efficient space. With limited supply of this product, a scarcity is emerging which is driving up rents for the best buildings.
Inherent in this reasoning lies an assumption that vacancy in older and less well located offices is irrelevant to prime rents as these properties do not compete with Grade A buildings.
To see the flaw in this logic, consider a market with three well defined quality grades, and imagine yourself as the owner of a vacant Grade C office.
Unless you are highly risk-embracing and have access to the capital for a deep retrofit, your only option to get this lesser quality property leased is to drop the rent. Critically, this triggers knock-on events. Grade B operators now have to counter-cut to restore their competitive advantage.
In turn, owners of Grade A buildings have to counter-cut to remain competitive with the Grade Bs. This explains how vacancy at any level of the market eventually impacts top rents.
A reflexive pushback is to argue that many Grade C buildings are so inferior that they would be unlettable to State bodies and blue-chip companies at any price.
Counter-cut
This is absolutely true. But the relevant economic process does not rely on the worst buildings appealing to the best occupiers by being cheap enough. They only have to appeal to occupiers who would otherwise be in the market for marginally better premises, forcing the owners of those properties to drop their rents.
In turn, this passes the pressure to counter-cut up to the next quality level in a minutely variegated market. This is how the rot spreads, right to the top.
Switching our attention to the pricing signal, information that can be gleaned from independent sources is consistent with the arguments that vacancy remains high and that this is suppressing prime rents.
Based on his market intelligence, analyst Colm Lauder says the rents being achieved on prime buildings appear to be clustering in and around €60 per square foot per annum – in line with prevailing levels over the past decade, and well below figures that the surrounding rhetoric might imply.
MSCI data supports this view. Estimated rental values in its prime central Dublin portfolio have fallen by 1.4 per cent since the onset of Covid. After general price inflation, this translates into a 20 per cent real decline.
Compounding this, de facto discounts such as rent-free periods have become more substantial. At the same time, advancements in building specifications mean tenants are paying less for better accommodation.
Office occupiers undoubtedly prefer high-spec, energy efficient space. But economic demand is not about how much of a product consumers want when money is no object. It is defined by how much they want at a given price.
It seems clear that the demand for top quality office space in Dublin is quite limited at current quoting rents. The indications are everywhere – in the sign boards advertising new-build city centre offices, long after they have reached completion.
In the empty floors that are visible from the streets. In the increased confidentiality around lease details. And, if reports are correct, in the rent levels that are being achieved behind the scenes.
The best new buildings will eventually get taken up. However their owners will have to be patient, because remote working and stalled growth in tech employment have slowed the pace at which even the best quality space is being absorbed. They will also have to be pragmatic because, as long as headline vacancy remains elevated, aspirational rents will not be achievable.
John McCartney lectures in property economics at TU Dublin and is adjunct associate professor at UCD.
