Face­book and Google to the fore in year of cap­i­tal’s mon­ster prop­erty deals

2018 will be re­mem­bered as the year Dublin came of age as a tech hub of global im­por­tance

The Irish Times - Business - - BUSINESS COMMERCIAL PROPERTY - Justin Comiskey

In a year of mon­ster deals, Face­book’s re­cently an­nounced move to the 14-acre Bank­cen­tre cam­pus op­po­site the RDS in Balls­bridge has real wow fac­tor: “It is the largest of­fice let­ting to ever com­plete in the Dublin mar­ket,” says Marie Hunt of CBRE.

When re­de­vel­oped by 2022, the site will al­low the so­cial me­dia gi­ant to grow its Dublin head­count by 5,000 and quadru­ple its of­fice foot­print in the cap­i­tal to 80,825sq m (870,000sq ft). The deal will see Face­book move its 2,200 staff from Grand Canal Square (start­ing in March/April next year). It also means that AIB, which cur­rently oc­cu­pies the Balls­bridge site, is look­ing for a new cor­po­rate head­quar­ters.

“To put the Face­book deal in con­text, it is nearly three times the next largest sin­gle of­fice take-up on record in Dublin, namely the 300,000sq ft built by Mi­crosoft in South County Busi­ness Park last year,” says James Meagher of Knight Frank.

“The scale of the let­ting shows that for­eign di­rect in­vest­ment into Ire­land re­mains strong, de­spite pre­vail­ing head­winds such as muted tax rule changes and Brexit. In­deed, the lat­ter could be be­hind much of the tech ex­pan­sion in Dublin as com­pa­nies choose to ex­pand in the sta­ble en­vi­ron­ment pro­vided by Dublin rather than an uncertain Lon­don.”

Boland­sQuay

Google com­pleted a num­ber of large deals dur­ing the year, but its most sig­nif­i­cant trans­ac­tion was the pur­chase of the Bolands Quay devel­op­ment along­side its Bar­row Street head­quar­ters in the south dock­lands for about €300 mil­lion. This is one of the largest city cen­tre ur­ban re­newal projects in years and in­cludes 28,000sq m (301,389sq ft) of of­fice space, 46 apart­ments, cafes and cul­tural spa­ces.

Its stand­out fea­ture is three land­mark tow­ers – one ris­ing to 53m (173ft), another to 49m (161ft) and a third to 47.8m (157ft). The in­ter­net search gi­ant is to re­tain the of­fice el­e­ment and ap­point a let­ting agent to man­age the re­main­ing space.

“The Bolands Quay deal was par­tic­u­larly sig­nif­i­cant,” says Tanya Duffy of Lis­ney. “Fol­low­ing this trans­ac­tion, Google’s com­bined floor space rep­re­sented 2.5 per cent of Dublin’s to­tal mod­ern of­fice stock. Large in­ter­na­tional tech com­pa­nies like Google are ab­sorb­ing huge amounts of of­fice space. Since 2014, the sec­tor has typ­i­cally ac­counted for be­tween 30 and 45 per cent of all ac­tiv­ity across Dublin, which compares with 10 per cent in 2006/2007.”

Meagher points out that Google’s of­fice ac­qui­si­tion spree now means it has “strate­gic con­trol” of much of the south docks.

“This il­lus­trates their long-term com­mit­ment to the city and, more im­por­tantly, gives them huge room for ex­pan­sion. Which means a lot of highly paid jobs will be avail­able. To­gether with the Face­book deal, 2018 will be re­mem­bered as the year that Dublin truly came of age as a tech hub of global im­por­tance.”

Beck­ett Build­ing

Another eye-catch­ing deal was the pur­chase, for €101 mil­lion, of the 17,652sq m (190,000sq ft) Beck­ett Build­ing on East Wall Road in Dublin 3 by South Korea-based Kook­man Bank. It had pre­vi­ously sold for about €5 mil­lion in 2013 when ac­quired by the Comer Group af­ter it was of­fered for sale by re­ceivers act­ing for Bank of Scotland (Ire­land).

The scheme had been de­vel­oped by Liam Car­roll of Zoe De­vel­op­ments shortly be­fore the mar­ket col­lapsed in 2007. The Comer Group spent about €30 mil­lion on a high-spec fit out be­fore se­cur­ing Face­book on a 15-year lease at €4.53 mil­lion a year.

“The Beck­ett Build­ing trans­ac­tion – while not the big­gest of the year – is note­wor­thy,” says Duffy. “It dis­pels the myth that in­vest­ing is about lo­ca­tion, lo­ca­tion, lo­ca­tion. That adage should be tim­ing, tim­ing, tim­ing.”

Another key as­pect of the Beck­ett Build­ing deal is that Dublin is now con­sid­ered main­stream by global real es­tate cap­i­tal mar­kets. Some com­men­ta­tors point to Asian in­vestors in par­tic­u­lar show­ing a strong in­ter­est in Dublin.

“Where large-scale, high-qual­ity core of­fice as­sets are of­fered, there is strong in­ter­na­tional in­vestor in­ter­est,” says Hunt. “And re­cent trans­ac­tions clearly demon­strate that Asian in­vestors will look at Ire­land if the op­por­tu­nity is good enough.”

Dublin Land­ings

This year also wit­nessed the on­go­ing growth of ser­viced of­fice space and spe­cial­ist providers to this ex­pand­ing seg­ment. “About 12 per cent of of­fice take-up in Dublin in the first nine months of 2018 was ac­counted for by flex­i­ble oc­cu­piers which proves this trend is here to stay,” says Hunt.

The most sig­nif­i­cant deal in this sec­tor was WeWork agree­ing to lease about 9,245sq m (99,513sq ft) of of­fice space at No 2 Dublin Land­ings, close to the new Cen­tral Bank build­ing on North Wall Quay in the fast-de­vel­op­ing north dock­lands. The over­all Dublin Land­ings pro­ject, which will ex­tend to more than 100,000sq m (1,076,380sq ft), is be­ing de­vel­oped by Ir­ish prop­erty com­pany Bal­ly­more and its Sin­ga­pore part­ner Ox­ley.

In fur­ther ev­i­dence of Asian in­ter­est in the Dublin mar­ket, a South Korean real es­tate in­vest­ment trust has just bought No 2 Dublin Land­ings for €106.5 mil­lion, re­flect­ing a net ini­tial yield of 4.21 per cent. WeWork is pay­ing an ini­tial an­nual rent of €4.87 mil­lion with a fixed up­lift to €5.38 mil­lion in year five. The Cen­tral Bank re­cently bought blocks four and five (with a com­bined 18,850sq m/200,000sq ft) at Dublin Land­ings for about €210 mil­lion.

Pro­ject Wa­ter­front

The most sig­nif­i­cant devel­op­ment site to sell this year was prob­a­bly the 4.6-acre Pro­ject Wa­ter­front in the north Dublin dock­lands for more than €180 mil­lion. It was bought by a joint ven­ture formed by de­vel­oper Johnny Ro­nan and US in­vest­ment group Colony Cap­i­tal.

It is the last size­able wa­ter­front site in this part of the city and has plan­ning per­mis­sion for four of­fice build­ings, with a com­bined 27,890sq m (300,216sq ft) of space, and 420 apart­ments. How­ever, given re­vised plan­ning guide­lines, it will be no sur­prise if per­mis­sion is sought for a larger scheme.

Ei­ther way, any fin­ished devel­op­ment will be well-po­si­tioned to ben­e­fit from the huge weight of eq­uity seek­ing a home in Dublin’s pri­vate rented sec­tor.

Kennedy Wilson’s pur­chase of a 4-acre site at the Grange on the Stil­lor­gan Road – part of a €160 mil­lion deal that also in­cluded 274 apart­ments – marked one of the last ma­jor dis­pos­als by Nama of its res­i­den­tial stock. As a re­sult, says Meagher, “we be­lieve that the next stage of the cy­cle will see in­vestors in­creas­ingly turn to for­ward fund large-scale res­i­den­tial de­vel­op­ments on a build-to-rent ba­sis. There is up to €5 bil­lion of cap­i­tal chas­ing op­por­tu­ni­ties in this sec­tor in Dublin.

“The on­go­ing Di­a­geo part­ner­ship ne­go­ti­a­tions for a 12.6-acre site at St James’s Gate is one to watch. With the build­ing-out of the dock­lands nearly com­plete, de­vel­op­ers and in­vestors are look­ing to­wards the next growth area of the city. St James’s Gate will of­fer a site of scale that has the po­ten­tial to be a cat­a­lyst for the trans­for­ma­tion of this Dublin 8 city quar­ter.”

Mean­while, the 0.72-acre site of the for­mer Apollo House on Tara Street was re­cently re­ported to have made more than €40 mil­lion in a sale to Mar­let Prop­erty Group, which al­ready has plan­ning per­mis­sion for an of­fice scheme at the ad­join­ing for­mer of­fices of An Post and Screen Cin­ema.

In terms of re­tail, Hunt points to the re­de­vel­op­ment and ex­ten­sion of the Fras­cati Shop­ping Cen­tre in Black­rock as a “great ex­am­ple of repo­si­tion­ing older re­tail stock to meet chang­ing con­sumer needs as the sec­tor faces struc­tural pres­sures”.

Duffy points to the let­ting of 72 Grafton Street to UK brand The White Com­pany as “re­flec­tive of the re­tail mar­ket at present”. Mar­ket­ing of the prop­erty be­gan in 2016 and re­fur­bish­ment works were un­der­taken, but a lease was not signed un­til March 2018. “There are re­tail ten­ants in the mar­ket­place but they are very se­lec­tive when it comes to prop­erty and want the right prop­erty to suit their brand,” she says.

A sig­nif­i­cant trans­ac­tion in the in­dus­trial sec­tor was the sale, for about €51 mil­lion, of the 195-acre for­mer Hewlett-Packard cam­pus in Leixlip, Co Kil­dare, to Black­Rock Real Es­tate As­sets and de­vel­oper Michael O’Flynn.

“This was a very im­por­tant deal for the mar­ket,” says Hunt, “as it of­fers the chance to de­velop scale.”

The let­ting of Unit 665 at Greenogue Busi­ness Park in Rath­coole was no­table, ac­cord­ing to Duffy, for its size (at 10,000sq m/107,639sq ft) and be­cause it was spec-built. “It em­pha­sises the strength of de­mand for large in­dus­trial fa­cil­i­ties.”

Brexit could be be­hind much of the tech ex­pan­sion in Dublin as com­pa­nies choose to ex­pand in the sta­ble en­vi­ron­ment pro­vided by Dublin rather than an uncertain Lon­don

The on­go­ing Di­a­geo part­ner­ship ne­go­ti­a­tions for a 12.6-acre site at St James’s Gate is one to watch . . . de­vel­op­ers and in­vestors are look­ing to­wards the next growth area of the city

€300m Price paid by Google for Bolands Quay

72 Grafton Street Its let­ting to UK brand The White Com­pany is ‘re­flec­tive of the re­tail mar­ket at present’

€180m The most sig­nif­i­cant devel­op­ment site to sell this year was the 4.6-acre Pro­ject Wa­ter­front in the north Dublin dock­lands

€51m Price paid by Michael O’Flynn for the for­mer Hewlett-Packard cam­pus in Leixlip

€4.87m Ini­tial amount WeWork is pay­ing per an­num for of­fice space at No 2 Dublin Land­ings

€101m Price paid by South Korea-based Kook­man Bank for the Beck­ett Build­ing

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