Cork de­vel­op­ment on the up as busi­ness eyes real cap­i­tal value

Irish Independent - Business Week - - APPOINTMENTS - Donal Buck­ley

Cork City is cur­rently see­ing in­creased de­vel­op­ment of of­fices, ho­tels and stu­dent ac­com­mo­da­tion. How­ever the city has had lit­tle, if any, new apart­ment de­vel­op­ments de­spite in­creased em­ploy­ment, and ris­ing res­i­den­tial rents in con­trast to the up­surge in build-to-rent de­vel­op­ments in Dublin.

Lis­ney re­ports four new of­fice schemes cur­rently un­der con­struc­tion in Cork with a com­bined floor area of 27,000 sq m (290,625 sq ft) and most of this space has al­ready been taken, re­flect­ing the strong oc­cu­pier de­mand.

O’Cal­laghan Prop­er­ties is de­vel­op­ing Nav­i­ga­tion Square on Al­bert Quay, the largest de­vel­op­ment un­der con­struc­tion. Its Block A will ex­tend to 13,800 sq m (148,542 sq ft) and has been let to Clearstream. A fur­ther 15,600 sq m (167,917 sq ft) at Block B, has be­gun and is to be com­pleted in the lat­ter part of 2019.

The city’s most ac­tive de­vel­oper, John Cleary De­vel­op­ments (JCD), is due to com­plete 4,600 sq m (49,514 sq ft) of of­fices at 85 South Mall in the first quar­ter of next year and has al­ready let it to busi­ness con­sul­tants KPMG, with US-based cy­ber se­cu­rity com­pany For­ce­point oc­cu­py­ing the ground and first floors.

Ear­lier this month work got un­der­way on site clear­ance for JCD’s Pen­rose Dock de­vel­op­ment in the city cen­tre which will of­fer a to­tal gross floor area of 39,992 sq m (430,470 sq ft), in­clud­ing base­ment and 23,000 sq m (247,570 sq ft) of of­fices across two build­ings. Work is ex­pected to take in the re­gion of 18 months to com­plete.

Also due for com­ple­tion early next year is the 6,700 sq m (72,118 sq ft) fa­cil­ity at 3 East­gate Drive in Lit­tle Is­land to the east of the city which O’Flynn Con­struc­tion is de­vel­op­ing and has pre let to US pharma firm, Eli Lilly.

A fur­ther 12 schemes have plan­ning per­mis­sion for a com­bined floor area of 162,400 sq m (1,748,059 sq ft) of which seven are in the city cen­tre while three are in the south sub­urbs and one each in the west and east sub­urbs.

These in­clude Claren­don and BAM’s HQ at Hor­gan’s Quay with 28,700 sq m (308,924 sq ft) of of­fices; JCD’s City Gate Ma­hon with 26,000 sq m (279,862 sq ft); West­field Of­fice Quar­ter in Ballincol­lig with 24,500 sq m (263,716 sq ft) and Trin­ity Quar­ter in the city cen­tre with 22,700 sq m (244,341 sq ft).

Mar­garet Kelle­her of Lis­ney says there are two fur­ther de­vel­op­ments cur­rently in the plan­ning sys­tem, namely the 5,500 sq m (59,201 sq ft) Prism on Clon­tarf Street and 17,000 sq m (182,986 sq ft) across two build­ings on the for­mer Ma/Comm site in sub­ur­ban Ma­hon.

Mean­while De­nis O’Donoghue of CBRE says there are as many as 1,500 ho­tel bed­rooms in the pipe­line across five projects. These in­clude the soon to open 163-bed Mal­dron Ho­tel on South Mall. Nearby, BAM is build­ing a 220-bed­room ho­tel at Sul­li­van’s Quay.

On MacCur­tain Street, Trigon Ho­tels Ltd, which owns the Metropole Ho­tel, is plan­ning to in­crease ca­pac­ity to 400 bed­rooms in­clud­ing the ad­di­tion of a new ur­ban ho­tel called ‘The M’. This will bring to four the num­ber of ho­tels owned by the Al­varez fam­ily in Cork, in­clud­ing two at the air­port.

Joint de­vel­op­ers Claren­don and BAM have be­gun work on their new ho­tel at HQ on Hor­gan’s Quay near the rail­way sta­tion. Across the river near the bus sta­tion, Dublin-based com­pany, Te­trarch Cap­i­tal, has ap­plied for plan­ning per­mis­sion for a 165-bed­room ho­tel at 7-9 Par­nell Place.

O’Donoghue says that the city’s tourism in­dus­try will ben­e­fit from the de­vel­op­ment of the new event cen­tre at the for­mer Beamish & Craw­ford brew­ery site. This will also help to un­der­pin the stu­dent ac­com­mo­da­tion de­vel­op­ments which are un­der­way in the city, as they will sup­ple­ment the sup­ply of sum­mer tourist ac­com­mo­da­tion when the stu­dents are away.

The lat­est stu­dent project will see London-based Fu­ture Gen­er­a­tion, un­der­take a 600-bed space project on a site it ac­quired at Car­ri­gro­hane Straight Road con­ve­nient to both UCC and the Cork In­sti­tute of Tech­nol­ogy. Closer to the univer­sity, at The Lough, an­other de­vel­oper Lyon­shall (Ban­don Road) Ltd is re­ported to be seek­ing per­mis­sion to in­crease the size of an ap­proved project by 98 to 418 stu­dent bed spa­ces.

But a lack of apart­ment de­vel­op­ment has raised con­cerns among Cork busi­ness peo­ple. In a re­cent in­ter­view John Mullins, chair­man of the Port of Cork, told the Evening Echo lo­cal news­pa­per that: “The prob­lem is we haven’t built apart­ments for a very long time, the only things be­ing built are stu­dent ac­com­mo­da­tion… That is not go­ing to do any­thing for re­turn­ing em­i­grants who want a home for their kids or for for­eign na­tion­als who want to work here in new jobs in places like Ap­ple and EMC. They are all strug­gling to find a place to live.

“My sense is that the big­gest threat to eco­nomic growth in our re­gion is the lack of a hous­ing sup­ply. Think about trades­peo­ple for ex­am­ple. How are you go­ing

In train:

artists’ im­pres­sions of the Nav­i­ga­tion Square, Pen­rose Quay, and Hor­gan’s Quay schemes to at­tract back an elec­tri­cian, or fit­ter or plumber from Aus­tralia or Canada if there is no hous­ing?” he added.

De­spite av­er­age res­i­den­tial rents in the city grow­ing by 4.9pc in the sec­ond quar­ter of this year to €1,123 per month, de­vel­op­ers are not at­tracted by the re­turns from apart­ments.

De­nis O’Donoghue points out that even with some two-bed­room 93 sq m (1,000 sq ft) apart­ments fetch­ing rents of €1,800 per month, a build-to-rent de­vel­oper would get an an­nual rent of only €17.28 per sq ft. “That is way be­low the €33 per sq ft which a de­vel­oper can get from rent­ing prime city cen­tre of­fices,” he ex­plains.

“The Gov­ern­ment needs to re­duce the 13.5pc VAT in or­der to make it more at­trac­tive to de­velop the city cen­tre apart­ments,” he ex­plains.

“City cen­tre apart­ment de­vel­op­ment would not alone in­crease the sup­ply of hous­ing but also in­crease the vi­brancy of the city cen­tre at a time when on­line re­tail ac­tiv­ity poses in­creas­ing chal­lenges for shops and high streets,” he adds.

On the other hand, Cush­man & Wake­field is fore­cast­ing that the rate of in­crease in Cork’s prime of­fice rents will slow from an 11pc growth in the 12 months to Septem­ber this year to 1.4pc growth next year which could help to nar­row the gap be­tween rents in both sec­tors.

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