Savills said take-up across the Dublin office market for 2023 will fall below the respective tallies of the “Covid years” of 2020 and 2021.

“In fact, we have to go back to 2010 to find an annual take-up figure below the projected 1.3 m sq ft expected in 2023,” said Savills.

“Coupled with an increase in the availability of sublet space, this has seen the vacancy rate for Dublin reach its highest level in almost 10 years.

“Market conditions in the past 12 months has provided a perfect storm for occupier procrastination. A combination of higher interest rates, WFH initiatives, rising fitout costs, tech sector redundancy impacts, and general economic uncertainty has served to reduce market activity generally.

“To give some context, 12 requirements in excess of 50,000 sq ft transacted in 2022 compared to a single letting north of this yardstick in 2023.

“This trend of reduced activity is generally replicated across all major US and European cities. Occupier demand has generally been dominated by the financial and professional services sectors who see opportunities for strategic take-up as the TMT sector recalibrates.

“Occupiers have become increasingly concerned about fit-out costs which has resulted in many choosing to extend their lease on a short-term basis or relocate to short term sublet space to alleviate immediate cost concerns.

“The upshot of this, is a continued focus on quality sublet space. Only 2 of the 8 lettings between 10-20,000 sq ft so far this year, have taken CAT A office space demonstrating occupier focus on short-term stopgap solutions.

“This trend is likely to fuel increased demand for new ESG compliant space in the coming years, at a time when the supply of new Grade A office buildings is certain to reduce significantly.

“This pinch-point will be caused by a growing ESG focus among occupiers who are now obliged to report their carbon footprint annually. Simultaneously, speculative new development (thus availability of quality office space) has already reduced significantly.”

Savills said the outlook for 2024 is “increasingly more optimistic.”

Savills said headline rents have remained robust especially around the St Stephens Green “hinterland” where demand is particularly strong.

Office-based employment is continuing to rise, with greater focus on employees spending more time in the office.

“Our office is tracking a large number of enquiries in excess of 50,000 sq ft totalling almost 3m sq ft of active demand, which is expected to transact in 2024/25,” said Savills.

“EY, Deloitte, BNY Mellon, Eversheds Sutherlands and Mason Hayes & Curran are some of the known live requirements of scale, while other sizeable relocations are expected.

“Furthermore, we expect a number of State and Semi-State agencies to relocate from older buildings in to new ESG compliant alternatives.

“In total, we estimate that there is over of 1.2m sq ft of office lettings reserved and likely to transact in 2024, demonstrating a reasonable tailwind for the office market to build on as we head into the new year.

“We can expect continued strong occupier focus on sublet space on a short-term basis.

“The better sublet space is generally being accounted for as the flight to quality continues, leaving a balance of largely obsolete space that may struggle to attract interest.

“The quality of vacant space is likely to decline as the best space is picked off.

“This inevitable increased activity in 2024 will serve to improve take-up and reduce the vacancy rate as minimal new developments emerge to satisfy this growing demand.

“Speculative development is limited to those already on site and occupiers who procrastinate will start to become disappointed with the number of options available to them over time.

“Savvy occupiers are being encouraged to take advantage of prevailing market conditions as landlords are undoubtedly more confident of an improved market performance beyond 2024.”