DUBLIN OFFICE MARKET OVERVIEW Q1 2019 WITH SPECIAL FOCUS: SANDYFORD - RESEARCH - Knight Frank
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RESEARCH DUBLIN OFFICE MARKET OVERVIEW Q1 2019 WITH SPECIAL FOCUS: SANDYFORD OCCUPIER TRENDS INVESTMENT TRENDS MARKET OUTLOOK
DUBLIN OFFICE MARKET OVERVIEW Q1 2019 RESEARCH
Q1 OVERVIEW
Salesforce, which was the biggest TMT made-up the remainder of the top five note included Zurich’s taking of 18,500 sq
SUMMARY single letting in the history of the State.
With Salesforce currently occupying
deals, with Facebook taking 174,000 sq ft
at Nova Atria South, while Docusign have
ft at Trident House in Blackrock, which has
recently been refurbished by Friends First.
2019 gets off to a strong start as 1.4 million sq ft of office approximately 150,000 sq ft between taken 99,000 sq ft at 5 Hanover Quay. The Elsewhere, in a reputedly Brexit-motivated
Sandyford Business Park and Central OPW also took the available space at the letting, Kroll Bond Rating Agency have
1. 57,000 new jobs expected to space transacted in Q1, setting a new bar for occupier Park, the new development will extension to Bishops Square, where they taken 3,300 sq ft at 6-8 College Green. The
be created in Ireland in 2019
according to the ESRI activity in an opening quarter of a year. represent a trebling of the company’s have leased 47,000 sq ft. Other deals of financial services company signalled its
footprint in Dublin. intention back in 2017 to choose Dublin for
FIGURE 3 its first office outside of the United States in
2. 1.4 million sq ft of office space Economy although the subsequent announcement
of a six-month extension to the Brexit
The second largest deal was the sale of
No.4 & No.5 Dublin Landings to the Irish
Take-up by sector what was hailed as a Brexit win at the time
was let in Q1, 85% ahead of the by the IDA. Prime office rents remain stable
In their Spring Quarterly Economic deadline has largely kicked this risk down Central Bank which together extend to
same quarter last year TMT STATE OTHER
at €62.50 psf.
Commentary, the ESRI have revised the road for now. The ESRI baseline 201,000 sq ft, with completion due for
Ireland’s real GDP forecast for 2019 to scenario is forecasting that 57,000 new later this year. Located directly to the
3. 48% of the office development 3.8% from the 4.2% contained within the jobs will be added to the economy this rear of the Central Bank’s Headquarters 11% Development market
pipeline in 2019 is already let, Winter edition. The downgrade is a result year which will continue to underwrite – which extend to 193,700 sq ft – on 524,000 sq ft of office space was
with 45% of expected 2020 of greater uncertainty in the international strong occupier demand for office space. North Wall Quay, the acquisition 32% completed in the opening quarter as a
delivery also taken environment arising from a deteriorating facilitates the consolidation of the number of buildings reached practical
outlook for Ireland’s key trading partners.
In February, the Bank of England cut
Occupier market Central Bank’s footprint in one location. completion. The largest of these was
4. €278.1 million worth of office As part of this process, the Bank has Blackstone’s Nova Atria South, followed
their growth forecast for the UK to 1.2% 1.4 million sq ft of office space transacted
investment transactions changed signalled its intention to sell Block R on by Hibernia REIT’s 1SJRQ and IPUT’s 5 &
– down from 1.7% in November – while in Q1, setting a new bar for office
hands in Dublin during Q1 Mayor Street Upper which it purchased 57% 6 Earlsfort Terrace. Of the 2.2 million sq ft
in March the Federal Reserve cut the occupier activity in an opening quarter
in 2015 for €104.0 million. With the forecast to be delivered this year, 48% is
US growth outlook to 2.1% from 2.3% of a year. To put this in context, it was
NTMA having previously leased No.1 already let, with 45% of 2020 delivery also
5. With a vacancy rate of just 3.1%, in December. Also during March, the 85% ahead of the take-up achieved
Dublin Landings, the area will represent taken. Focusing on the city centre, 52% of
Sandyford is seeing heightened European Central Bank reported that the in Q1 2018, which itself had set a new
the heart of the State’s financial sector new stock due in 2019 is already let with
development activity euro area economy is likely to expand by record for Q1 activity. The market was
in Ireland. 55% of expected 2020 delivery taken too.
just 1.1% this year, down from the 1.7% dominated by the TMT and State sectors, Source: Knight Frank Research
forecast in December. which accounted for 57% and 32% of the The third largest deal was also
market respectively with the remaining completed by the State, with the FIGURE 4 FIGURE 5
While the relative strength of the Irish
sectors accounting for just 11% between OPW pre-letting 182,000 sq ft at The Take-up by location Dublin prime office rents
economy vis-à-vis its main trading € per sq ft per annum
them. Reflecting the greater potential for Distillers Building in Smithfield, with
partners is clear, the big caveat to this 2% WEST
new development, the majority of activity completion due in 2021. There was SOUTH SUBURBS
baseline scenario is that it assumes the €70
was located north of the River Liffey strong competition among occupiers SUBURBS
avoidance of a no-deal Brexit. Modelling 3% NORTH
which had a 63% market share. for this letting, illustrating the strength SUBURBS €60
undertaken by the ESRI has estimated
of Smithfield as an office location.
FRINGE
18%
that a disorderly no-deal Brexit would The largest deal was the pre-letting
This augers well for the pre-letting 15% €50
reduce growth to 1.2% this year, of 430,000 sq ft at Spencer Place to €40
of Haymarket House, an office
development to be built across from €30
The Distiller’s Building.
KNIGHT FRANK VIEW ON RISK
€20
CITY CENTRE €10
FIGURE 1 While the Brexit deadline of March While our research illustrates that the
FIGURE 2
Office take-up 62% €0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Q1 2019
sq ft
Number of Brexit-related 29th came and passed with the United Dublin office market has more to gain
announcements by city Kingdom still members of the European than any other European centre from 4,000,000
Union, the risk that Brexit represents to Brexit, it should be noted that Brexit- Source: Knight Frank Research Source: Knight Frank Research
100 3,500,000
the Irish economy continues to cast a long related office take-up has been quite
90
86 shadow. However, the Dublin office market low so far. 3,000,000 Top 5 office leasing transactions
80
is comparatively well hedged against the
70 We estimate that 135,000 sq ft of 2,500,000
Property Tenant Sector Size (sq ft)
downside risks that Brexit presents.
60 take-up in Dublin since the referendum 2,000,000
50
55 Our recent Brexit Under Pressure #2 can be directly attributed to Brexit, Spencer Place, Dublin 1 Salesforce TMT 430,000
47 47 report – conducted in conjunction with although this excludes the ten 1,500,000
40 41 No.4 & No.5 Dublin Landings,
Central Bank of Ireland State 201,000
30 our European colleagues (see back companies that have taken space in 1,000,000 Dublin 1
20
of this report) – shows that Dublin coworking locations. The harder the The Distillers Building, Dublin 7 OPW State 182,000
500,000
stands to benefit the most from Brexit outcome of Brexit, the more likely we
10
relocations. Dublin has received 86 are to see announcements translate Nova Atria South, Dublin 18 Facebook TMT 174,000
0
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Q1 2019
Dublin Luxembourg Paris Amsterdam Frankfurt announcements, 56% ahead of its into a significant number of jobs on the 5 Hanover Quay, Dublin 2 DocuSign TMT 99,000
Source: Knight Frank Research nearest competitor Luxembourg. ground in Dublin.
Source: Knight Frank Research Source: Knight Frank Research
2 3
DUBLIN OFFICE MARKET OVERVIEW Q1 2019 RESEARCH
SANDYFORD
Building N, Central Park
Size: 477,000 sq ft
Status: Has planning KEY
Owner: Green REIT ESB Site – Phase 1 OFFICE LETTINGS
Red Oak South Size: 268,559 sq ft
Date: Q3 2018 M50 Status: Has planning OFFICE INVESTMENTS
Rent: €30.00 psf Owner: ESB
Take-up: 17,562 sq ft OFFICE DEVELOPMENTS
Tenant: PLR Worldwide Sales EXISTING PURPOSE-BUILT OFFICES
Sector: TMT
OTHER BUILDINGS
Building I, Central Park
LUAS TRAM LINE
Size: 103,400 sq ft
Red Oak North Status: Under construction
Date: Q1 2018 Due date: Q2 2019
Rent: €29.00 psf Owner: Green REIT
Take-up: 17,562 sq ft
Tenant: Cardinal Health
Whelan House & Sector: Medical
Accenture House Building H, Central Park
Date: Q1 2018 Date: Q2 2017
Yield: 5.78% Rent: €27.00 psf
Price: €22,300,000 South County Take-up:158,244 sq ft
Buyer: Blacktree Tenant: AIB
Business Park Central Park Sector: Finance
The Blackthorn Building
Date: Q1 2018
HEATHER RD
BRACKEN RD
Building G, Central Park Rent: €24.00 psf
Date: Q2 2018 Take-up: 48,522 sq ft
Rent: €30.00 psf
FURZE RD
Tenant: Google
Take-up: 25,540 sq ft Sector: TMT
Tenant: Salesforce Ravenscourt &
Sector: TMT Mercury House
Note: Sublease Date: Q1 2018
Three South County 2nd & 3rd Floor,
Size: 45,208 sq ft BU Highfield House Yield: 8.24% BLACKTHORN RD
RTO Price: €12,750,000 Paramount Court
Status: Has planning NH Size: 296,642 sq ft
ALL Status: Has planning Buyer: Private Irish Date: On market
Owner: Cyril McGuire DR
One Microsoft Place Owner: Ardstone Yield: 7.49%
Date: Q4 2017 Guide Price: €7,000,000
ARENA RD
Rent: Owner occupier Sandyford
TREE ROCK RD
Take-up: 300,000 sq ft
Two South County Business
Tenant: Microsoft Beacon South
RAVENS ROCK RD
Sector: TMT Size: 98,221 sq ft PARK
Status: Has planning
Quarter
CORRIG RD
Owner: Cyril McGuire
BURTON HALL RD Nova Atria South
Date: Q1 2019 The Chase
Corrig Court
BLAC
One South County RD
Leopardstown West Rent: Approx. €30.00 psf Date: Q1 2018
WN Size: 394,142 sq ft Take-up: 174,000 sq ft Rent: €25.75 psf Date: Sale agreed
Size: 141,000 sq ft TO
KTHO
S Status: Has planning Tenant: Facebook Take-up: 52,925 sq ft Yield: 6.80%
Status: Under construction
A RD Owner: Aldgate Developments Sector: TMT Tenant: Google Guide Price: €12,300,000
Due date: Q2 2019 OP
RN D
LE Sector: TMT
Owner: Cyril McGuire
CARMANHA
BALLYMOSS RD
R
LL RD
ARKLE RD
The Hive
Eden Plaza Size: 72,945 sq ft
BREWERY RD
Size: 450,000 sq ft Status: Under construction
Status: Has planning Due date: Q3 2019
Owner: Ardstone Owner: U+I
Note: Currently on market BL
for €20,000,000 AC
KT Nova Atria North
HO Date: Q4 2017 Silverstone House
RN Rent: €26.25 psf Date: Sale agreed
AV Yield: 6.52%
E Take-up: 89,920 sq ft
Tenant: Fleetmatics Guide Price: €11,500,000
Sector: TMT
BLACKTHORN DR
Termini
Size: 221,523 sq ft
Status: Under construction
Due date: Q2 2020
Owner: Aldgate Developments
Note: All figures noted above are approximate estimates only and may be subject to change.
4 5
DUBLIN OFFICE MARKET OVERVIEW Q1 2019 RESEARCH
Investment SPECIAL FOCUS: SANDYFORD
market has been grappling with the 2017. The sale of Charlemont Exchange
rise of coworking for a while now, also demonstrates the continued strong
€278.1 million worth of office investment buildings leased to coworking firms are appetite by Asian investors – and
transactions changed hands in Dublin now feeding through to the investment particularly South Korean investors
during Q1, placing it approximately market for sale. While there has been – for office assets in Dublin, with the INTRODUCTION
in the median of quarterly investment much debate among investors regarding deal boosting their share of the market
There is 3.62 million sq ft of purpose-built
volumes witnessed over the last five the strength of the coworking covenant, to 54%. European buyers accounted
office space in Sandyford, accounting
years. There was a shortage of large the reality is that their share of the for 35% of the market and acquired the for 8.4% of Dublin’s office market stock.
deals during the quarter with just occupational market is now too large other two coworking transactions, namely Half of the Sandyford office market is
one over €100.0 million transacting, to ignore. the IWG tenanted 77 Sir John Rogerson’s located in Sandyford Business Park with
although we expect this to change with Quay for €35.5 million and the Iconic
The sole deal to change hands in the remaining half almost evenly split
a number of sales likely to take place Offices tenanted South Point for €12.7
excess of €100.0 million was the sale between South County Business Park
during the year including The Reflector, million. French investors were also behind
of the WeWork occupied Charlemont and Central Park.
Bishops Square and 5 Hanover Quay. the second largest deal of the quarter as
Exchange by Marlet to South Korea
The three office locations contain three
An interesting trend observed in Q1 was based Vestas Management for €150.0 BNP Paribas REIM purchased The One Termini
Building for €49.5 million. The property is distinct personalities: Central Park
the growing importance of the coworking million, representing a net yield of 4.5%.
has benefited from being under single
sector to the investment market with The property is one of six buildings currently the European headquarters for
three of the top five deals involving currently let by the coworking firm since Irish founded tech unicorn Stripe. Prime
ownership control which has facilitated
integrated placemaking, South County has
LETTING AND FIGURE 10
coworking firms. While the occupational they entered the Dublin market in Q4 office yields are unchanged at 4.0%.
a campus feel while Sandyford Business INVESTMENT ACTIVITY Take-up by sector since 2014
Park retains a mix of uses, with office use Sandyford has witnessed strong take-up SANDYFORD DUBLIN
FIGURE 6 FIGURE 7 particularly concentrated on its northern in recent years, peaking at just under 65% TMT
47%
Dublin office investment volumes € million Buyer and vendor source edge in proximity to the two LUAS stops. 600,000 sq ft in 2017, of which half
FINANCE
Sandyford’s appeal as an office location is was accounted for by the opening of 18% 15%
1,000
ASIA EUROPE IRELAND OTHER
due to being situated in a relatively affluent Microsoft’s new Dublin HQ. Even after
1% STATE 11%
area of South Dublin while simultaneously stripping this deal out, it represented a
800
4% being suitable for high density office doubling of take-up activity compared to PROFESSIONAL
7% development and enjoying good transport
3% SERVICES 8%
the average of 150,000 sq ft witnessed
links to the city centre. during the preceding five years and OTHER
600 BUYERS 13% 19%
marked an inflection point for the
FIGURE 9 Source: Knight Frank Research
VENDORS Sandyford office market.
400 Sandyford office take-up sq ft
100% Last year, activity remained strong at absent from Sandyford, accounting for
35% 300,000
200 54% 270,000 sq ft which included Google’s just 1% of the market.
250,000 taking of 101,400 sq ft across two
buildings – The Chase and The Blackthorn The strong levels of take-up in Sandyford
0 200,000 Building – while Facebook took 174,000 has seen the vacancy rate decline to just
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
sq ft at Nova Atria South in Q1 this year. 3.1% at the end of Q1, with the grade-A
150,000
Although TMT has been the driver of vacancy rate even lower at 2.4%. Breaking
Source: Knight Frank Research Source: Knight Frank Research 100,000 occupational activity across the Dublin the vacancy down by sub-market, we
market, it is even more so in Sandyford see that South County Business Park
50,000
FIGURE 8 where it has accounted for 65% of and Central Park have extremely tight
Top 5 office investment transactions 0 take-up over the last five years as vacancy rates of 0.4% and 1.9%
Dublin prime office yields 2014 2015 2016 2017 2018 Q1 2019
€1000 mil
illustrated in Figure 10. The Finance sector respectively, with Sandyford Business
2019
Approx. SANDYFORD BUSINESS PARK
Property Seller Buyer
2018
8% Park slightly higher at 5.2%. The tight
CENTRAL PARK has also been an important source of
2018
price
Q1
2018
€800 mil SOUTH COUNTY BUSINESS PARK
Q4
2018
7% activity accounting for 18% of deals over vacancy has seen rents double from the
Q3
2017
Charlemont Exchange,
Q2
2017
Marlet Vestas Management €150.0m Source: Knight Frank Research the period while the State has been largely mid-teens to now stand at €30.00 psf.
Q1
2017
6% Dublin 2
Q4
2017
€600 mil
Q2
2016Q3
2016
The One Building,
Q1
5%
2016
Jones Investments BNP Paribas REIM €49.5m Sandyford market at end Q1 2019 sq ft
Q4
2016
Dublin 2
Q3
2015
€400 mil
Q2
2015
4%
Q1
2015
Standing stock Vacancy Grade-A Under construction Potential
Q4
2015
77 Sir John Rogerson’s
€35.5m
Q3
2014
3% €200 mil Hibernia REIT Confidential vacancy with planning
Q2
2014
Quay, Dublin 2
Q4
2014Q1
2014
2%
Sandyford 73,000 – The Hive, due Q3 2019
Q3
2013
South Point, 1,750,000 5.2% 4.3% 1,410,000
Q2
2013
0 Lugus Capital Corum €12.7m Business Park 221,500 – Termini, due Q2 2020
Q1
2013
1% Dublin 2
Q4
2017 Q1 2013
Q2 2013
2018 Q3 2013
2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
2013
Q3
Q1Q2
Central Park 870,000 1.9% 1.9% 103,400 – Building I, due Q2 2019 480,000
Q1 2019 Q4
0% Newenham Court, Northern
€10.4m
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Private Irish Private Canadian
Cross, Dublin 17
South County
1,000,000 0.4% 0.0% 141,000 – One South County, due Q2 2019 140,000
Business Park
Source: Knight Frank Research Source: Knight Frank Research
Overall 3,620,000 3.1% 2.4% 538,900 2,030,000
6 7RESEARCH
John Ring, Head of Research
+353 1 634 2466
john.ring@ie.knightfrank.com
Robert O’Connor, Research Analyst
+353 1 634 2466
robert.oconnor@ie.knightfrank.com
CAPITAL MARKETS
Adrian Trueick, Director
+353 1 634 2466
adrian.trueick@ie.knightfrank.com
Peter Flanagan, Director
+353 1 634 2466
peter.flanagan@ie.knightfrank.com
Building I, Central Park Ross Fogarty, Director
+353 1 634 2466
ross.fogarty@ie.knightfrank.com
Investment volumes in Sandyford have there is a further two million sq ft of office
been relatively low in recent years, with space with planning in place. The appetite OFFICES
volumes being less than €50.0 million for developing these schemes out will be Declan O’Reilly, Director
in each of the last three years. This determined by the speed at which those +353 1 634 2466
is reflective of the lack of investable currently under construction are taken-up. declan.oreilly@ie.knightfrank.com
stock of scale, with many of the larger Paul Hanly, Director
opportunities having already traded earlier
in the cycle. Silverstone House and Corrig
OUTLOOK +353 1 634 2466
paul.hanly@ie.knightfrank.com
Court are currently believed to be sale As one can see from the accompanying
Jim O’Reilly, Director
agreed, while the second and third floors map, it is interesting to note that much of +353 1 634 2466
of Paramount Court are on the market for the potential delivery is gravitating to the jim.oreilly@ie.knightfrank.com
€7.0 million. centre of the map around Central Park
Gavin Maguire, Associate Director
and the Leopardstown West development. +353 1 634 2466
Ardstone’s schemes of Eden Plaza
DEVELOPMENT (currently for sale for €20.0 million) and
gavin.maguire@ie.knightfrank.com
Mark Headon, Associate Director
ACTIVITY Highfield House are located at the eastern +353 1 634 2466
Along with One Microsoft Place, the only edge of Sandyford Business Park, while mark.headon@ie.knightfrank.com
other new development to be delivered this Cyril McGuire’s schemes in South County
David Reddy, Associate Director
cycle has been the 158,000 sq ft Building are at its Western edges with Central +353 1 634 2466
H in Central Park, which was let to AIB in Park and Aldgate’s Leopardstown West david.reddy@ie.knightfrank.com
Q2 2017 for a rent of €27.00 psf. Two new development sitting at the centre of this
builds are due for delivery in early Q2 2019, activity. Over the long-term, the building-
namely One South County and Building I, out of these schemes will increase the
Central Park – both of which are quoting ease of access between the three office
rents of excess €30.00 psf. The extensive locations which will help tie together
refurbishment at The Hive is due for Sandyford as an integrated office location
completion in Q3 of this year while Aldgate of scale. Also of note, Sandyford’s long-
Developments are currently constructing term strategic importance in facilitating
221,500 sq ft at Termini, with delivery Dublin’s future growth was underlined
due for Q2 of 2020. In total, this activity recently when it was identified as the
will add 538,900 sq ft – or 15% – to the southern terminus for the Emerging
© HT Meagher O’Reilly trading as Knight Frank
office stock of Sandyford. Looking ahead, Preferred Route for the Dublin Metrolink.
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be relied upon in any way. Although high standards have been
used in the preparation of the information, analysis, views
and projections presented in this report, no responsibility or
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trading as Knight Frank for any loss or damage resultant
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