Reflecting the slowdown in the tech sector, digital companies accounted for just 7.1% of third-quarter commercial real estate takeup, down from 51% of takeup between 2017 and 2021.

In a new report by BNP Paribas Real Estate Ireland, the agency cautioned over short-term headwinds impacting the market and the huge downturn in tech-related leasing, although it saw positive signs for the Dublin office market.

BNPPRE said that Q3 takeup rose by 66% year-on-year to nearly 517K SF, consolidating improvements seen in Q2, while demand from traditional sectors such as financial and professional services remained strong. Takeup is already 22% ahead of the full-year 2023 figure.

The adviser said a recent jobs surge had also raised hopes that tech leasing could reignite, while there remains plenty of choice for tenants seeking quality business space on flexible terms. The development pipeline is also slowing.

BNPPRE warned the momentum behind the back-to-office dynamic appeared to have slowed, and sublets and assignments, which do not absorb vacant space, accounted for nearly half of Q3 takeup.

Dublin has one of Europe’s highest office vacancy rates at 15.7%. Although slowing, a considerable pipeline of new office construction — more than 344K SF was completed in Q3 — is likely to push vacancy higher in the short term.

“The ongoing improvement in take-up is an important first step towards a market recovery,” BNPPRE Director of Research John McCartney said in a statement. “However, with a significant pipeline of new space already under construction, vacancy is likely to tick-up further in the short-term, keeping pressure on rents.

“With the quantum of space rising more quickly than the number of deals, the average transaction size rose from circa 7K SF one year ago to nearly 11K SF in Q3 2024. Nonetheless only one deal of over 50K SF was done — a 133.4K SF lease assignment from LinkedIn to EY at Two Wilton Park. This compares with a long-term average of three such deals per quarter, and likely reflects the continued inactivity of global tech occupiers in the current market.”