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DUBLIN’S OFFICE MARKET has attracted considerable commentary in recent months, much of it anchored to a single figure: the headline vacancy rate.
At 18.6%, it looks alarming. It has prompted warnings, headlines and no shortage of speculation about whether recovery is real or merely wishful thinking from those with a vested interest in saying so.
We understand the scepticism. But the headline vacancy rate, taken in isolation, is one of the most misleading figures in Irish commercial real estate right now. Not because it is wrong, but because it treats an increasingly fragmented market as if it were a single, uniform product. Across outlets and commentators, the same number gets cited, the same conclusion gets drawn, and the same important distinctions get missed.
Eighteen months ago, Savills said that vacancy rates in certain city centre locations would fall sharply. Dublin 2, and specifically Core D2, the area in proximity to St Stephen’s Green, was the location we identified.
That is exactly what has happened.
Prime rents rose 4% year-on-year to reach €65 per sq ft in Q4 2025, the highest level ever recorded, driven by strong occupier interest and substantial pre-let activity. We also forecast that rents for future delivery of pre-let stock in this area would rise to €75 to €80 per sq ft, reflecting the availability gap created by rising building costs and interest rates since Covid, similar to what happened after the financial crisis.
Based on transactions we are currently involved in, we believe that the forecast is about to be proven. People operating in this market in real time see a very different picture than those working from historical aggregated data alone.
A significant proportion of what counts as vacant space in Dublin is, in practical terms, unlettable. These are older, secondary buildings that fall well short of the ESG standards now required by occupiers.
Companies across Ireland are legally required to report their carbon footprint annually. Many cannot sign a lease on a building that does not meet minimum energy and sustainability standards, regardless of how attractively it is priced. For some occupiers, this is a formal legal requirement. State agencies have committed to occupying only A-rated buildings by 2030. For others, notably the professional and financial services firms that dominate Dublin’s office market, ESG compliance is commercially mandatory: firms competing for State and multinational work are increasingly scored on carbon emissions, gender pay gap and wider sustainability credentials alongside fees and experience.
A poor ESG score on a tender must be recovered elsewhere, usually on price. The office a firm occupies is one of the most visible and measurable ways to protect that score. These buildings are not empty because demand is weak. They are empty because they are functionally obsolete for the tenants actively searching for space.
As for why landlords are not simply upgrading these buildings, the answer lies in the structure of commercial leases. Repair and maintenance obligations are typically passed to tenants during the lease term, so buildings reach end-of-life in a stand-off. Tenants patch and extend rather than invest in a building they do not own.
At lease expiry, the cost of bringing an older building to modern specification, including façade replacement, new plant and full ESG retrofit, has risen steeply since Covid. Income-producing funds, many of them European pension vehicles, often lack the mandate or the appetite to undertake redevelopment at scale. The result is a cohort of buildings caught between tenants who have left and owners unwilling or unable to act.
At the same time, companies are relocating from older stock into new, ESG-compliant buildings in prime locations. BNY Mellon, KPMG and Stripe have already made this move in Dublin 2, in some cases relocating a matter of a hundred yards to upgrade their building and avoid the rising cost of maintaining ageing stock. EY and Deloitte are expected to follow, alongside a number of leading legal firms actively seeking terms on new headquarters.
Companies including Vodafone, ESBI and Sage have also relocated from older suburban stock into the CBD. Each of these transactions can simultaneously raise the headline vacancy figure while filling a new building of a different Grade in a different part of the city. A blanket vacancy rate that treats all grades of stock in all parts of the city as equivalent tells you very little about what is actually happening on the ground.
This is happening in many global cities where the difference is even more stark – rents rising on one side of the street for new stock while falling on another side for older stock.
A fair question is whether this dynamic is limited to large multinationals and whether smaller occupiers, and parts of the city beyond Dublin 2, tell a different story. The honest answer is: partly. Smaller firms are under less formal ESG pressure, and vacancy in secondary suburban locations is a genuine structural problem that will not resolve quickly.
But the notion that ESG pressure is confined to large corporates understates how procurement now works. Smaller professional firms competing for public sector or multinational contracts are scored on sustainability credentials as part of the tender process. The ESG imperative flows down the supply chain, not just through it. The market beyond Dublin 2 is more challenged – but the forces shaping it are the same.
Some commentary has suggested that landlords offering rent-free periods and fit-out contributions are concealing weakness. Lease incentives have been a standard feature of the Dublin office market throughout its existence, through booms and busts alike. They are not a distress signal. They originated to help tenants with the cash flow of fitting space at the start of a lease (which has increased relative to the costs of rents).
The correct metric is whether incentives relative to committed lease terms are rising or falling. On the best stock in the best locations, they have not materially increased.
Headline rents on prime space have held firm through a period of significant inflation. What has changed is that on secondary tick, incentives have stayed flat while lease terms have shortened, and rents have softened. It no longer makes sense for landlords of prime stock to increase incentives when upwards only rents have been banned since the GFC and reset to open market after five years. That is the market correctly distinguishing between quality tiers, not evidence of broad distress.
The buildings trading at steep discounts are assets that no longer meet modern requirements, and the cost of upgrading them has risen steeply since Covid.
Well-let investment properties endure the effects of rising interest rates and yields, a global phenomenon rather than a Dublin one, thus not indicating any pressure peculiar or unique to Dublin.
Their repricing is painful, but it is the market functioning correctly. What receives far less attention is the supply side. The pipeline of new, grade-A, ESG-compliant office space in Dublin is effectively exhausted. Due to viability gaps, other than 4/5 Grand Canal Square, there will be no meaningful new speculative delivery by the end of 2027.
And therefore, it follows that when the cohort of occupiers currently extending short-term leases returns to the market needing permanent space, their options will be considerably more limited than they are today.
We have seen this before. Between 2014 and 2016, office rents on Burlington Road alone rose by 60% as the post-crisis supply gap became apparent. Several of the world’s leading AI companies are actively seeking space in Dublin right now, and by and large are focused on Dublin 2.
The Central Bank’s projection of a potential 22% vacancy rate under a severe scenario has also been widely cited as a troubling forecast. It is not. Modelling extreme downside scenarios is what central banks do as a matter of course. It is how they ensure banks hold adequate capital buffers against risks that may never materialise. A severe scenario in a regulatory report is not a prediction. We would be more concerned if they were not producing it.
The headline vacancy figure tells you that a lot of space exists. It does not tell you whether that space is of any use to the companies actively looking for it.
Until commentary on this market starts making that distinction, it will continue to describe a Dublin that no longer exists.
Andrew Cunningham is Director of Offices at Savills Ireland.
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