IRELAND 2019 OFFICE MARKET REPORT - Lambert Smith Hampton
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IRELAND 2019 OFFICE MARKET REPORT
IRELANDOFFICE
IRELAND OFFICEREPORT
REPORT 2019
WELCOME
What a fantastic year 2018 was! Take-up across Ireland
STUART DRAFFIN was record breaking, exceeding the 5.5m sq ft mark for
Head of Agency – Belfast
+44 (0)28 9026 9215 the first time. In addition to the overall record breaking
sdraffin@lsh.ie
activity, take-up in the Dublin city centre, Belfast and
Cork markets each surpassed previous highs.
Looking back, it was the so-called FAANGs (Facebook, Apple, Amazon, Netflix,
Google) which grabbed the headlines. Some of these tech giants demonstrated
their commitment to Ireland and ambitions for growth in 2018. Facebook announced
their plans for their new EMEA headquarters at Ballsbridge, the largest deal in Irish
history. Google purchased Bolands Quay and opened new locations in the Sandyford
tech cluster, and Apple completed their Hollyhill campus expansion in Cork.
The revolution of serviced office operators and how occupiers consume office space
also continued, with an eight-fold increase in two years. WeWork were the driving
force behind the meteoric rise in Dublin city centre during 2018, while in Belfast
there was growth in local and boutique operators.
Given that political uncertainty characterised 2018, the markets have shown
negligible impact, instead breaking records. The strong demand was fuelled by
significant delivery of new and refurbished office stock, particularly in Dublin’s
Central Business District. With more stock under construction, supply remains
stable and grade A availability is currently healthy. Outside of Dublin, significant
schemes are expected to come forward during 2019 in Belfast, Cork and Galway.
In keeping with the buoyant theme, office investment activity reached €1.4bn in
2018, almost double that of the previous year. This strong performance was a
combination of the strength of the occupier market, healthy development of new
stock, institutional activity and the occurrence of €100m+ deals. While we expect
PLACEMAKING......................................................................................................................... 4-5 that office investments will continue to dominate and new stock coming forward will
FOCUS ON................................................................................................................................. 6-7 provide a source of new quality product, its hold will continue to be chipped away by
REGIONAL INSIGHT industrial, alternative and private rented sector investments.
OCCUPIER MARKET OVERVIEW.......................................................................................... 10-13
To capitalise on future opportunities for growth and return on investment, a granular
TRACKING DEMAND..................................................................................................................14
understanding of the key markets remains critical. If you would like any guidance or
INVESTMENT MARKET REVIEW.......................................................................................... 15-17 further information in respect of the Ireland office markets, please contact our team
MARKET INSIGHT of experts – we’d be delighted to help.
BELFAST............................................................................................................................... 20-21
DUBLIN CITY CENTRE.......................................................................................................... 22-23
DUBLIN OUT-OF-TOWN....................................................................................................... 24-25
Stuart Draffin
2 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH
SMITH HAMPTON
HAMPTON 3
IRELAND OFFICE REPORT 2019
PLACEMAKING
REIMAGINE &
REINVENT
The relationship between people and place is not a new concept.
Placemaking puts this relationship at the heart of design and development
of new spaces, a hands-on approach to reimagine and reinvent public
spaces as the centre of a community.
PLACEMAKING AT BONHAM creating opportunities and community will be equivalent in size to two-thirds
QUAY, GALWAY for both the public and the 3,000 team of Croke Park.
members in office spaces, breakout
At Edward Capital we understand the Bonham Quay, will be an example of
terraces, desks and gardens below.
importance of place. Our vision for good placemaking and a workplace
The extensive glazing allows for
Bonham Quay is to create a product campus where employees and their
that is ‘More than an office’ – where maximum access to views.
wellbeing are looked after. Following
consideration is given to how the Through creating a series of the WELL Building Standard means
people and place connect from design interconnecting streets around consideration will be given to the
to delivery, to create a contemporary the central courtyard we are able quality of air, water, nourishment,
workplace that reflects the unique to integrate the building with the light, fitness, comfort and mind. The
culture that Galway city has to offer. The surrounding areas. The public squares provision of facilities for exercise,
340,000 sq ft docklands development and plazas have been designed to meditation and mindfulness through
will be arranged across four office be multifunctional and adaptable. a wellness centre, green spaces and
blocks alongside two public squares They can be used for impromptu and gardening amenities will improve the
that all connect via landscaped bridges The Waterside, Belfast
organised events such as pop up WELL Building Standard.
and streets. markets, performances and outdoor
For more information, please contact:
The concept is of a ‘highline’ for Galway cinema screenings. When complete,
– vertical green spaces arranged up the development will be 43% open Edward Capital
through, and on top of the buildings space and the new landscaped space www.edward.ie
PLACEMAKING AT THE investment. We asked how it connects places to live, play, work and stay, but it
WATERSIDE, BELFAST physically and emotionally with those will also provide opportunity in the form
who live and travel here. We asked how of BEON, a talent generator where new,
Placemaking is a subject that many well Belfast works as a city, how people
Bonham Quay, Galway undiscovered and emerging talent can
people talk about but few actually do travel from one side to the other. Now we be nurtured, supported and showcased.
well. There’s one reason for this, it’s are trying to work out how we can design
not easy! Traditional developers like to and plan our bit of the city to create a truly All of these plans are part of a pioneering
dictate what is going to happen on a site. shared and safe place, part of a new age ‘PlaceMaking Plus’ strategy that
They design a few glossy commercial and of city living. connects Osborne+Co with the people
luxury residential buildings, apply some of Belfast, convenes with industry and
slick marketing, find an anchor tenant, academia and helps to contribute to the
CONVENING
put a big open space in the middle, fill it global appeal of Belfast as a place to
with bollards and some grass. Then they We explored how easy it is to set up locate business. These three Cs form
wait for people to come. But that doesn’t a business in Belfast; the reasons the guiding principles of The Waterside
work and it hasn’t worked for a long time. why an organisation might relocate
project, highlighting Osborne+Co’s
here. We explored ideas that would
At Osborne+Co, we have learned that desire to really make a difference to the
encourage students from NI and the
architects and builders don’t make a city of Belfast by working with its people
wider diaspora to stay here or move
place - people do. Our placemaking to create spaces that the city can be
home again. We have met with local
strategy for Belfast has been based communities and listened carefully to proud of for years to come.
on three cornerstones. Connecting, their ambitions for the city and their
Convening and Contributing. dreams for their children. For more information, please contact:
Patricia Hanson
CONNECTING CONTRIBUTING Communications + Marketing Director,
In shaping our plans we asked ourselves With private, affordable and social Osborne+Co
how Belfast connects with the world on a homes, hotel, commercial buildings and Patricia.Hanson@osborneandcompany.com
global level, how it attracts foreign direct public spaces, The Waterside will provide www.osborneandcompany.com
4 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 5
IRELAND OFFICE REPORT 2019
FOCUS ON
DUBLIN CITY FOR MORE INFORMATION PLEASE CONTACT
FRINGE
JOE O’DONOGHUE
Director – Office Advisory
+353 (1) 673 1425
jodonoghue@lsh.ie
With space in Dublin’s core business district tightening and home to the buildings constructed for residential,
office and commercial space. New
highest prime rents, opportunities for occupiers, developers and investors public spaces and streets will be fully
integrated into the wider Liberties area.
exist in the city fringe areas of Dublin 7 and 8. Our analysis of the city fringe
According to media reports, Diageo
identifies the area’s benefits. is in the final stages of selecting a
development partner. The final three
candidates for the joint venture are
ALREADY THERE DEVELOPMENT BOOST and provide high quality options for
Hines, Ballymore and U&I, with the
potential occupiers.
The city fringe is already home to a After a long run of absence of announcement of preferred partner
diverse tenant profile and a host of development in the city fringe, activity expected soon.
major occupiers. Workday, OPW and is beginning to pick up. Currently, the GUINNESS IS GOOD FOR
The Bar Council – Law Library are all only scheme under construction is DUBLIN 8 FRINGE VALUE
situated north of the Liffey in Dublin 7. Oakmount’s 61 Thomas Street (13,000
In 2017 Diageo, Guinness’s parent As a proportion of Irish office investment
On the opposite side of the river, AIB, sq ft), due for delivery in Q2 2019.
company, announced plans to redevelop activity, Dublin 7 and 8 typically accounts
HSE, AOL and Iconic Offices are located for an inconsiderable percentage
Demolition works have commenced 12.6 acres of its 50 acre St James’ Gate
in Dublin 8. (averaging around 1%), primarily due
at the Linders of Smithfield Distillers complex in Dublin 8. The mixed-use
Many occupiers do not consider it a Building (180,000 sq ft). The 8 Building world-class urban centre will create to a lack of stock. In 2018, however, St James’s Gate, Dublin 8
compromise to locate in the city fringe. (80,000 sq ft) on Newmarket Square a new city quarter to be known as St. investment in this area accounted for 15%
Instead, they are reaping the benefits of has completed demolition and is James’s Gate Quarter. of Irish office volume, boosted by the sale
headline rents around 25% lower than scheduled for completion in Q3 2020. of the Eir Headquarters at Heuston South
In the company’s vision, old brew and Quarter for €176m (NIY 5.70%) and 31-36
prime city centre options, government Also from Linders of Smithfield,
vat houses will be repurposed and new Golden Lane for €25.5m (NIY 5.26%).
policies focused on area regeneration Haymarket House (74,000 sq ft) is
and significant forthcoming scheduled for completion by end of While there is yield value in city fringe
developments. 2020, with construction expected to TENANT PROFILE 2017-2018 offices, with an average lot size of under
begin this year. €5m, purchasers of office buildings in
The city fringe also benefits from
PUBLIC SECTOR, this area tend to be private investors. The
excellent transport links; serviced by Planning consent is also in place for forthcoming developments may appeal
NOT-FOR-PROFIT
the Luas Red Line, home to Heuston further developments, including 30 CHARITIES to a broader range of investor types, Haymarket House, Dublin 7 The Distillers Building, Dublin 7
Station, one of Dublin’s main commuter
stations, and conveniently located for
Old Kilmainham Road (40,000
sq ft). These new developments will 19 33
including private equity firms and REITs.
access to the M4/N4 and N7. boost availability in the city fringe CONSTRUCTION &
ENGINEERING TOP FIVE LETTINGS 2017-2018
The 8 Building, Dublin 8
15
13
FINANCE, BANKING
& INSURANCE 32PropertySERVICES Size (sq ft) Date Occupier Occupier Type
10 PROFESSIONAL
SERVICES
151 Thomas Street 69,636 Q4 2018 Iconic Co-working/Serviced office
9 TECHNOLOGY,
MEDIA &
2 HSQ, Heuston South Quarter 56,245 Q4 2018 AIB Finance, banking & insurance
TELECOMS
17 PUBLIC SECTOR,
3 7 8 NOT-FOR-PROFIT,
Infinity Building,
CHARITIES Smithfield 37,173 Q1 2017
Department of
Social Protection
Public sect, not-for-profit,
charities
34 CO-WORKING/
SERVICED OFFICE
Block B, Cultural Space, Smithfield Square 36,307 Q4 2017 Rothco Professional services
FINANCE,
BANKING &
INSURANCE
Public sector, not-for-profit
The Brunel Building, HSQ 31,225 Q2 2018 HSE
& charities
OTHER OTHER
6 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 7
IRELAND OFFICE REPORT 2019
REGIONAL
REGIONAL
INSIGHT
INSIGHT
8 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 9
IRELAND OFFICE REPORT 2019
OCCUPIER MARKET OVERVIEW
IRELAND TAKE-UP (000 SQ FT)
FACEBOOK LIKES
3,200
2,400
DUBLIN 1,600
800
The Irish markets put in a record-breaking performance in 2018, boosted
by major deals and demonstrating clear resilience to the political turmoil. 0
Belfast Cork Dublin CC Dublin OOT Galway Limerick
Occupiers are showing confidence in Ireland and benefitting from the wave of 2018 5-year average
development in recent years.
Across Ireland’s six key markets In addition to Facebook, a host of world breaking year, with two-fifths of space SUPPLY REMAINS STABLE planning consents in place, however, While the profile of serviced office
combined, take-up in 2018 reached a renowned names joined the 2018 list under construction pre-let.
Belfast 52%
development sites in the city centre are operators is becoming more48% diverse, 1.4
Despite the huge amount of
decade high of 5.5m sq ft, 28% above of occupiers expanding or relocating, becoming more limited. WeWork is by far the key occupier
Construction remains focused in Dublin development, supply of office space driving take-up. First entering the
2017’s total and a third higher than the including Google (200,000 sq ft at
five-year annual average. Activity was Bolands Quay, Dublin), Apple (170,000 sq
city centre, although activity in this Corkremained stable
across the markets Availability in each of the other
45% Irish market in 2017, their55%
presence 1.6
location decreased from 3.8m sq ft in 2017 at 8.2m sq ft, only 2% below 2017. With locations, however, declined by more
ft at Hollyhill, Cork), PwC (155,000 sq ft at is clustered in five Dublin city centre
boosted by a bumper final quarter, when to 3.5m sq ft in 2018. Development activity more speculative development coming than a fifth during the past 12 months,
locations totalling over 368,000
take-up was just shy of 2m sq ft. Merchant Square, Belfast) and LinkedIn
in Cork doubled during 2018, spurred on by Dublin
forward and grade CC at 60%,
A availability 45%two years of supply in 74%
with less than 26%to
sq ft. Their strategy has been 1.6
(152,797 sq ft at Wilton Terrace, Dublin). Belfast and Cork.
November 2018 saw Ireland’s largest tenant demand, particularly from the US there are no immediate concerns about pre-let new build or significantly
ever single office deal on record, technology sector. supply pressure. redeveloped buildings.
Facebook’s 870,000 sq ft agreement NEW SPACE FUELS RECORD YEAR
With a number of key developments
Dublin OOT METEORIC48%
RISE OF 52% 3.0
There are nonetheless contrasts Belfast continues to see growth from
at the former AIB Bankcentre site During 2018, construction of new stock completing during the past 12 months, between the markets. Availability in the
SERVICED OFFICES local, boutique operators in 2018,
in Ballsbridge, Dublin. As occupier increased for the fourth consecutive development at the beginning of 2019 Galway
two Dublin markets increased during 69%
Serviced offices was the fourth most 31%their
with Ormeau Baths extending 2.3
confidence has grown, large deals have year, standing at 6.4m sq ft and 11% has fallen to 4.3m sq ft. Given developer 2018, by 6% in the city centre and by 19% active sector during the past 12 current operation (7,873 sq ft), and
become more common, with nine deals above 2017. The strength of occupier confidence, particularly in Dublin and out-of-town, with both markets boosted months, responsible for just under half both Clockwise (30,319 sq ft) and
over 100,000 sq ft agreed during the demand and rapid uptake of new Cork, additional schemes are expected to Limerick
by new developments. Looking ahead, 57%
a million square foot of take-up, an 43% their
StepSpace (11,227 sq ft) opening 3.6
past 12 months. development was crucial to the record break ground during the year. both locations have a healthy level of eight-fold increase in two years. first locations.
Grade A share of supply** Grade B/C share of supply Years of supply
IRELAND TAKE-UP BY SIZE (000 SQ FT) IRELAND AVAILABILITY AS YEARS OF SUPPLY*
2,000
Belfast
1,800
1,600
Cork
1,400
1,200 Dublin CC
1,000
800 Dublin OOT
600
400 Galway
200
Limerick
0
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Grade A share of supply** Grade B/C share of supplyIRELAND OFFICE REPORT 2019
5%
IRELAND UNDER CONSTRUCTION (000 SQ FT)
Q4 2018 prime rent (per sq ft)
End 2019 growth
3,864
£22.00
3,202
2,973
2,543 2,491
4%
2,374
1,882
27.50
€
1,325 BELFAST
1,062
765
531
458
150
0 0%
2013 2014 2015 2016 2017 2018 Q1 2019
Speculative Pre-let
FACEBOOK’S FAITH to their Grand Canal Dock campus. 90,000 sq ft at Navigation Square, €65.00
Due for completion at the end of 2019, there is no doubt that Cork is currently DUBLIN CC
Facebook’s plans to move its EMEA
the mixed-use development will an attractive alternative to Dublin
headquarters to Bankcentre, include 200,000 sq ft of office space to for occupiers. GALWAY
Ballsbridge underlines its long term accommodate 2,500 staff. DUBLIN OTT
commitment to Ireland and ambitions
for growth. The company is vocal of Further increasing their footprint, TECH AT THE TOP
Ireland’s rich pool of talent and this show Google also leased 58,000 sq ft at
Grand Canal Quay, 52,925 sq ft at The While the tenant profile of Ireland is
of confidence follows its 2017 opening of
an Oculus (Facebook virtual reality unit) Chase, Sandyford and 48,522 sq ft at the diverse, over the past 12 months the
technology, media and telecoms sector
8%
office in Cork. Blackthorn Building, Sandyford.
was responsible for a huge 50% of take-
Totalling 870,000 sq ft, the Ballsbridge up. During 2018 there was a boom in the LIMERICK
HQ will be set across a number of RECORD BREAKERS growth of the Irish tech sector, including
indigenous digital and technology firms,
30.00
buildings and quadruples its existing While political uncertainty
supported by IDA Ireland, Enterprise
footprint in Ireland. The 1.4 acre characterised 2018, it appeared to have
Ireland and an increase in lending to this
€
campus will be developed into a state- a negligible impact on some of the key
of-the-art environment, incorporating Irish markets, instead reaching record sector from Irish banks.
collaborative and training spaces, and an levels of activity. In addition to deals aforementioned,
outdoor plaza. Take-up in Dublin city centre surpassed Allstate leased 138,225 sq ft at East
By 2020, approximately 4,000 Facebook 3m sq ft for the first time, boosted by the Bridge Street, Belfast, Hubspot leased
huge Facebook deal. In Belfast, 2018 113,034 sq ft at 1SJRQ, Dublin and CORK
employees will be located in the new
campus, with space to add another 5,000 take-up was more than double that of Autodesk leased 48,484 sq ft at
1WML, Dublin.
3%
staff in the following years. 2017, fuelled by two major deals, namelyIRELAND OFFICE REPORT 2019
TRACKING DEMAND INVESTMENT MARKET REVIEW
RELOCATION BOUNCING
TRIGGERS & DRIVERS BACK
What has been motivating companies to acquire new office space in Ireland Investment in offices dominated the Irish investment market in 2018,
and what influenced their choice of property? Our analysis of recent activity accounting for around 40% of total volume and almost doubling from 2017’s
above 5,000 sq ft reveals that expansion has overwhelmingly played a key role in level to stand at €1.4bn.
driving recent demand.
Kookman Bank’s €101m purchase
of Beckett Building was the
largest deal in Dublin OOT
TRIGGERS – WHAT IS PROMPTING Corporate activity was the main their end choice during 2018. This
RELOCATION? trigger of 17% of deals. In Belfast, was particularly evident amongst
Allstate opened their new 138,000 sq ft companies who chose to locate in
Over the past 12 months, almost three-
headquarters, the largest single office out-of-town Dublin, where prime rents
quarters of office relocations across
development for 15 years. In Dublin, are approximately 50% less than the
Ireland were triggered primarily by a
new entrants included Cardinal Health city centre. This includes Mastercard
need to expand. Expansion amongst
(17,562 sq ft), Truata (7,721 sq ft) and which leased 71,385 sq ft across three
the technology, media and telecoms
Social Talent (7,000 sq ft). properties at Mountainview Central
sector was particularly widespread,
Park. Firstsource relocated to the more
with Facebook, Google, Apple, HubSpot
cost efficient Concentrix House, Belfast
and Huawei amongst occupiers taking DRIVERS – WHAT DETERMINES after their departure from Oyster House
additional space. Healthy expansion END CHOICE due to landlord redevelopment.
activity was also noted amongst finance,
banking and insurance, and professional Location was the key determinant of In Belfast, recently refurbished
services occupiers. end choice amongst occupiers in 2018, properties appealed to a range of
accounting for 59% of deals above 5,000 occupiers who sought work space
The continued growth of serviced office sq ft and above, and consistent with last improvement. This included TLT at
operators boosted companies citing
year’s finding. Google’s purchase at River House (11,630 sq ft), Davidson
expansion, with WeWork very active
Bolands Quay (200,000 sq ft) is adjacent McDonnell at Longbridge House (5,350
in Dublin city centre expanding their
to their current Dublin city centre office, sq ft) and Savills at Longbridge House
operations. Iconic also added additional
whereas PwC are relocating from (5,226 sq ft).
co-working space at 151 Thomas Street,
Belfast city centre periphery to core at
Dublin (69,636 sq ft) and Ormeau Baths,
Merchant Square (155,012 sq ft).
Belfast (7,873 sq ft) extended into the
other half of the Victoria bathhouse There was an increase in occupiers
doubling their offer. IRELAND OFFICE VOLUME (€M)
prioritising cost as the key driver for
1,500
PRIMARY TRIGGERS 2018 (%) PRIMARY DRIVERS 2018 (%)
1,200
3131 6 26 2 900
7 7 6 6
Expansion
Expansion Location
Location 600
17 17 Corporate activity
Corporate activity CostCost
73 73 Lease events WorkWork
space
space
Lease events 27 27 59 59 300
Contraction
Contraction improvement
improvement
Consolidation Property attribute
Property attribute
Consolidation
Efficiency
Efficiency 0
H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018
Belfast Cork Dublin CC Dublin OOT Galway Limerick Half-year average
*Belfast office volume converted from sterling to euro using average conversion rate for each year.
14 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 15IRELAND OFFICE REPORT 2019
FOR MORE INFORMATION PLEASE CONTACT
DONALL MCCANN MARTIN MCCLOY NIGEL KINGSTON
Head of UK Regional Capital Markets Director – Capital Markets Director – Agency
+44 (0)28 9026 9220 +44 (0)28 9026 9236 +353 (1)673 1419
dmccann@lsh.ie mmccloy@lsh.ie nkingston@lsh.ie
STANDING STRONG by KanAm Grund REAM on behalf of two Other key out-of-town deals included, £21.8m purchase of the Metro Building 31-36 Golden Lane, Dublin 8 for €25.5m again be the dominant investment sector
South Korean institutions (NIY 4.21%) and Yew Grove REIT’s €29m purchase of One (NIY 5.75%) and Belfast Harbour (NIY 5.26%). in 2019. Both overseas and institutional
Investors were attracted by the strength
the Beckett Building was purchased for and Three Gateway (NIY 6.41%) and a Commissioner’s £15.2m purchase of buyers are expected to be very active in
of the Irish office occupier market Obel 68 (NIY 6.73%).
€101m by South Korean-based Kookman private investor’s €22.3m purchase at the coming year, with competition for the
while healthy development in 2018 has DUBLIN CITY CENTRE YIELDS AT
Bank (NIY 4.13%). South County Business Park (NIY 5.78%). sub-prime office assets in Dublin’s CBD.
provided a valuable source of stock. DECADE LOW
With office volume increasing a massive INSTITUTIONS ARE BACK WITH The strong demand for core product While office investment has remained
83% year-on-year, the 2017 changes CBD DOMINANCE DECLINES OTHER LOCATIONS PERFORM A BANG in Dublin city centre has put upward on top, its hold has been chipped away
to commercial property stamp duty in Outside of Dublin, volume was €158.9m Institutional investors acquired €0.54bn pressure on pricing, with the city’s by industrial, alternative and private
Office investment activity continues to
the Republic of Ireland evidently had a in 2018, 131% above 2017’s level and the worth of assets in 2018. With the majority prime yield edging down by another rented sector (PRS) investments. PRS
be concentrated in Dublin, accounting
negligible effect on investor appetite. highest since 2015. Healthy demand for of volume deployed in Dublin’s CBD, quarter of a point to stand at 4.00% at in particular, accounted for 20% of total
for nine of every ten euro invested. In
2018 was characterised by both real a break with recent trends, however, good quality assets led to increases in institutional investors demonstrated the end of 2018, the lowest in a decade. 2018 investment, overtaking retail for the
2018 saw a change in how capital was activity in the other key Irish markets, the a preference for prime assets. For first year. We predict that good quality
depth market activity and the occurrence The drop in volume in Dublin city centre
only exception being Galway. example, Credit Suisse purchased both PRS investment will be as keenly sought
of major lot size deals, with five deals in deployed across Dublin. The volume of shows that investors are looking for
New Century House in the International after as office investments, specifically
excess of €100m. The largest deals were activity in the central business district Cork volume quadrupled year-on-year yield in the other key markets. Yield
Financial Services Centre district for amongst institutional investors.
an undisclosed Far Eastern investor’s (CBD) fell to 59%, from an average of in 2018, boosted by three of the largest compression has also been evident in
€65.3m (NIY 4.02%) and the recently
purchase of Eir Headquarters for 81% in recent years. deals in recent years. A private investor the Dublin out-of-town market, but with
completed Sharp Building in Dublin 2 for With yield compression ongoing in
€176m (NIY 5.70%), Triuva’s purchase acquired the €21m sale and leaseback prime yields currently standing at 5.75%
This change indicates that investors are €56.3m (NIY 4.42%). Dublin, there is clearly yield to be found
of No. 1 Dublin Landings for €160m (NIY Block C at City Gate Park (NIY 7.00%), an better value is on offer compared to the
looking beyond the traditional core areas in the other markets. We forecast that
3.94%) and an undisclosed Dublin office off market purchase of a €20m property Private investors were very active in city centre. Outside of Dublin, prime
to deploy capital and into the suburbs 2018, investing €357.3m and 41% above yields range from 5.50% in Cork to 6.5% investors will continue to look beyond
portfolio sold for €160m. and a European Fund’s €16m purchase
for better value assets. Proportionately, average. Notably, over €209m of private in Limerick. Dublin for good value, higher yielding
of the Webworks (4.60%). office opportunities. With development
Notably, Far Eastern investors activity in the Dublin out-of-town market investment volume occurred on the
purchased three of the five largest has more than doubled since 2015, In Belfast, office investment activity city centre outskirts of Dublin 7 and 8 picking up in Cork and a number of
office assets for a combined €382.5m. boosted by the Beckett Building deal picked up in the second half of 2018 and where investors can find better value.
OFFICES WILL REMAIN ON TOP opportunities on the horizon in Belfast,
Including Eir Headquarters, No. 2 Dublin and currently standing at 15% of total finished 31% above the previous year. In addition to the Eir Headquarters, an The strength of demand for Irish office savvy investors may choose to deploy
Landings was purchased for €106.5m investment volume. Key deals included a local propco’s undisclosed private investor purchased investments will continue and offices will their capital in these locations instead.
IRELAND PRIME OFFICE YIELDS (%) IRELAND OFFICE VOLUME BY BUYER TYPE (€M)
600
8%
500
7%
400
6%
300
5% 200
4% 100
0
3% Institutions Private investors Propcos REITs Private equity Other/undisclosed
Belfast Cork Dublin CC Dublin OOT Galway Limerick
2018 Annual average
Q4 2018 (5-year low) 5-year high *Belfast office volume converted from sterling to euro using average conversion rate for each year.
16 Data source LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 17IRELAND OFFICE REPORT 2019
MARKET
INSIGHT
18 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 19IRELAND
IRELANDOFFICE
OFFICEREPORT
REPORT 2019
BELFAST OUTLOOK FOR 2019
BEST YEAR YET
Despite the challenging political climate, Belfast continues to demonstrate resilience. The GREG HENRY
recent announcements by Deloitte, Kainos and Neueda suggest that take-up will remain Associate Director –
Agency
strong into 2019. New entrants are taking advantage of the talent, clusters and ultrafast +44 (0) 28 9026 9265
broadband benefits that Belfast offers while long-standing occupiers are continuing to ghenry@lsh.ie
show their commitment to the city.
DONALL MCCANN
The expected vacuum before new development is delivered will lead to an ever-tightening Head of UK Regional
Capital Markets
grade A supply in Belfast. This could negatively impact 2019 take-up, but does present an +44 (0)28 9026 9220
excellent opportunity for landlords of secondary assets to reposition and add value. dmccann@lsh.ie
AT A GLANCE Q4 2018 DEMAND Annual take-up was driven by two CURRENT SUPPLY DEVELOPMENT AND REFURBISHMENT RENTAL VALUES AND YIELDS
LARGEST SINGLE LETTINGS sectors, which combined were DIMINISHING GRADE A REFURBS FILL THE VOID STEADY AS SHE GOES
responsible for two-thirds of take-
The Belfast market had a stellar 2018. Availability contracted by over a Development activity in Belfast is relatively Belfast’s prime headline rent has
2018 TAKE‑UP VS up, specifically technology, media
At 885,023 sq ft total take-up for 2018 quarter during 2018. At 656,637, healthy, although speculative new build increased steadily since 2011, from
5‑YEAR AVERAGE and telecoms (33%) and professional
surged to a new annual record, more current availability is equivalent to 1.4 development has been limited with new £12.00 per sq ft to the current level of
services (32%) sectors. While these
than double that of 2017 and 82% above years of supply, the lowest of Ireland’s schemes predominantly driven by pre- £22.00 per sq ft. While rents are forecast
sectors were active across all
+82%
the five-year average. key markets. lets. Currently under construction is the to rise incrementally again during
floorplate sizes, they dominated the
second phase of Bedford Square, a 213,000 2019, growth will be relatively modest.
The outstanding year was underpinned sub-5,000 sq ft market. At the end of 2018, a significant 52%
sq development due for completion in The absence of significant new build
by the two single largest lettings of the of available space comprised grade A
Serviced offices continue to expand 2020, and Lazer 2 at Weavers Court development indicates that no real step
past decade, PwC’s pre-let of 155,012 space. Nonetheless, at only 338,793
their presence in Belfast, with almost Business Park (40,000 sq ft). change will occur until additional new
sq ft at Merchant Square and the sq ft this equates to only half of 2018’s
75,000 sq ft of additional space build stock is delivered.
Department of Finance’s 150,000 sq ft grade A take-up, suggesting that a Over recent years availability of
YEARS OF dedicated to this sector during 2018.
lease of Nine Lanyon Place. shortage in supply is forthcoming. grade A space has been fuelled by The office investment market in Belfast
SUPPLY Clockwise opened a 30,319 sq ft co-
Grade A space ready for immediate refurbishments. In addition to the continues to be restricted by availability
Occupier demand for high quality space working office at the newly refurbished
occupation is available at River House aforementioned, refurbishments are of stock. Prime office yields stand at
1.4
continued with grade A stock accounting River House, BESpoke announced
(38,370 sq ft), City Quays 2 (23,128 sq ft) ongoing are ongoing at East Tower at circa 6.00% with a number of prime city
for three-quarters of take-up. The their expansion into Northern Ireland
and Artola House (19,175 sq ft). Lanyon Plaze (42,000 sq ft), McAuley centre assets transacting over the past
increase in grade A supply noted at the with a 19,774 sq ft letting at Adelaide
House (25,000 sq ft) and 20 Adelaide 12 months. In Q3, an undisclosed local
end of 2017 was central to satisfying Exchange and Ormeau Baths extended Elsewhere, there are a number of
Street (18,858 sq ft). propco purchased the Metro Building for
2018 demand. by 7,873 sq ft. schemes undergoing comprehensive
£21.8m (NIY 5.75%) and Belfast Harbour
refurbishment and due for completion While a lull in development activity
Commissioner’s purchased Obel 68 for
GRADE A SHARE during 2019. These include the is expected, a number of new build
£15.2m (NIY 6.73%).
OF SUPPLY remaining space at Merchant Square schemes are poised to commence
TAKE-UP (000 SQ FT) TAKE UP BY SECTOR (%)
(46,490 sq ft) and Chichester House including Belfast Waterside (250,000
52%
(45,998 sq ft). sq ft), City Quays 3 (250,000 sq ft) and
1,000 TECHNOLOGY,
MEDIA & International HQ, Tribeca (150,000 sq ft).
TELECOMS
800
33 AVAILABILITY (000 SQ FT) UNDER CONSTRUCTION (000 SQ FT) PRIME RENTAL VALUES FORECAST (£ SQ FT)
PRIME 1,200 800 25
YIELD
700
PROFESSIONAL 1,000
6.00%
600
32 SERVICES
600
20
5-YEAR AVERAGE 800
500
15
400 600 400
Q4 2018 PRIME HEADLINE 10
300
RENT (PER SQ FT) 400
17 PUBLIC SECTOR,
200
3 7 8
£22.00
200 NOT-FOR-PROFIT,
CHARITIES 5
200
100
CO-WORKING/
SERVICED OFFICE
0 0 0
0 FINANCE,
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Q1 2019
2011
2012
2013
2014
2015
2016
2017
2018
2019 (f)
BANKING &
2014
2015
2016
2017
2018
INSURANCE
Grade A Grade B/C OTHER Grade A Grade B/C Speculative Pre-let
20 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 21IRELAND
IRELANDOFFICE
OFFICEREPORT
REPORT 2019
DUBLIN CITY CENTRE OUTLOOK FOR 2019
RECORD BREAKING
Strong demand for city centre offices is expected to continue into 2019, particularly after JOE O’DONOGHUE
Director – Office
March when more UK-based occupiers are expected to relocate to Dublin to ensure easy Advisory
access to the EU. With much of the forthcoming new build developments pre-let, the +353 (1) 673 1425
serviced office sector is poised to take advantage of demand from new occupiers. jodonoghue@lsh.ie
ACTIVITY
While overall prime headline rents are expected to remain stable, there is the potential DONALL MCCANN
for rental growth in the docklands area where demand remains high and both sites and Head of UK Regional
Capital Markets
availability are becoming increasingly limited. +44 (0)28 9026 9220
dmccann@lsh.ie
AT A GLANCE Q4 2018 DEMAND LinkedIn at Wilton Terrace (152,797 sq ft), CURRENT SUPPLY DEVELOPMENT AND REFURBISHMENT RENTAL VALUES AND YIELDS
FACEBOOK’S FOOTPRINT Hubspot at 1SJRQ (113,034 sq ft) and IDA SUFFICIENT SUPPLY DEVELOPMENT EASES DOWN A RISE IN RENTS
INCREASES Ireland at Three Park Place (112,000 sq ft).
Supply levels remain relatively stable, With over 3.5m sq ft of office space Healthy levels of construction and
2018 TAKE‑UP VS Annual take-up in Dublin city centre has For the first time in recent years the standing at 2.6m sq ft at the end of 2018 under construction in 2018, there was continued depth of demand have
5‑YEAR AVERAGE increased for a third consecutive year, volume of grade B/C take-up surpassed and equivalent to 1.6 years supply. Supply no shortage of cranes on the city centre contributed to the steady increase in
climbing to a record high of 3.1m sq ft in grade A, with grade A space accounting is concentrated in the CBD (defined as skyline. Development eased down from prime rents since 2014. Strong demand
+41%
2018, 31% above 2017 and 41% above the for only 37% of 2018’s total. This was, D1, D2 and D4), with only 13% of stock its 2017 peak, with completions of just for high quality space saw a new headline
five-year average. however, skewed by the Facebook deal situated in the city centre outskirts. under 2m sq ft in 2018. Occupiers have rent of €65.00 per sq ft achieved at the
as AIB Bankcentre is currently in grade been keen to secure the high quality end of 2018, a level confirmed by leases
Activity was boosted by the single The market now offers a decent choice of
B condition. space, with over half of 2018 construction at Three Park Place and the Reflector.
largest deal on record in Ireland. quality options. Grade A space accounts
already pre-let.
Testament to its long-term commitment for a significant 74% of total supply, Prime yields sharpened during 2018 to
The technology, media and telecoms
in Ireland, Facebook leased 870,000 reflecting the high level of construction Over one million sq ft of new space is currently stand at 4.00%, evidenced by
YEARS OF sector continues to dominate the
sq ft at the former AIB Bankcentre site and refurbishment activity in recent currently under construction and due the €164m purchase at Dublin Landings
SUPPLY occupier profile, accounting for a huge
in Ballsbridge. The site will be home years. Immediately available is the for delivery in 2020, namely Charlemont by the Central Bank, reflecting 3.94% NIY.
58% of 2018 take-up. The serviced The largest deal was the €175m purchase
recently refurbished 5&6 Earlsfort Square (220,000 sq ft) and the Exo
1.6
to its new EMEA headquarters, with office sector was responsible for the
space to add an additional 5,000 staff Terrace (25,000 sq ft). Building (170,000 sq ft), which will be of the Eir HQ at Heuston South Quarter
second largest proportion of lettings Dublin’s tallest office block. by the property arm of CK Hutchison
when complete. Developments due for completion by year
(13%), boosted by WeWork’s lease of Holdings, reflecting 5.70% NIY.
Other major deals in 2018 included almost 354,000 sq ft across four city end include The Sorting Office (204,654 There is a considerable pipeline of
Google at Bolands Quay (200,000 sq ft), centre locations. sq ft), 91-94 North Wall Quay (201,081 planning consents in key locations,
sq ft) and 76 Sir John Rogerson’s Quay including large developments at Wilton
GRADE A SHARE (75,000 sq ft). Park (430,000 sq ft) and Spencer Place
OF SUPPLY (380,000 sq ft). Development sites are,
TAKE-UP (000 SQ FT) TAKE UP BY SECTOR (%) however, becoming increasingly limited,
74%
TECHNOLOGY,
particularly within the docklands where
3,500 MEDIA & one of the last remaining sites was sold
TELECOMS in 2018 for €113m.
3,000
57 AVAILABILITY (000 SQ FT) UNDER CONSTRUCTION (000 SQ FT) PRIME RENTAL VALUES FORECAST (€ SQ FT)
PRIME 3,500 4,000 80
YIELD 2,500
5-YEAR AVERAGE 3,000 3,500 70
4.00% 2,000 2,500
2,000
3,000
2,500
60
50
1,500
13 CO-WORKING/
1,500
2,000
40
Q4 2018 PRIME HEADLINE SERVICED OFFICES
RENT (PER SQ FT) 9 1,500
1,000 5 7 FINANCE, 1,000
30
1,000
€65.00
BANKING &
20
500
10 INSURANCE
500 500
PUBLIC SECTOR, 10
NOT-FOR-PROFIT,
CHARITIES 0 0
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Q1 2019
0 PROFESSIONAL
2011
2012
2013
2014
2015
2016
2017
2018
2019 (f)
2014
2015
2016
2017
2018
SERVICES
Grade A Grade B/C OTHER Grade A Grade B/C Speculative Pre-let
22 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 23IRELANDOFFICE
IRELAND OFFICEREPORT
REPORT 2019
2018
DUBLIN OUT-OF-TOWN OUTLOOK FOR 2019
GO GOOGLE!
While take-up during 2018 did not match the heights of the city centre, the out-of-town JOE O’DONOGHUE
Director – Office
market is expected to continue to attract technology, media and telecoms occupiers. Advisory
The suburbs offers the benefits of lower costs and locating alongside the likes of +353 (1)673 1425
Google and Microsoft. jodonoghue@lsh.ie
Looking ahead, the combination of new build supply and healthy demand will lead to DONALL MCCANN
rental growth during 2019, with prime headline rents expected to reach €32.50 per sq ft Head of UK Regional
Capital Markets
by year end. +44 (0)28 9026 9220
dmccann@lsh.ie
AT A GLANCE Q4 2018 DEMAND In a clean sweep across the three CURRENT SUPPLY DEVELOPMENT AND REFURBISHMENT RENTAL VALUES AND YIELDS
DEMAND FROM TMT SECTORS largest sub-markets, the technology, CONSTRUCTION BOOSTS SUPPLY SPECULATIVE DEVELOPMENT BECKETT BIG DEAL
Take-up in Dublin’s out-of-town market
media and telecoms sector dominated
Out-of-town availability increased by
RETURNS Since the end of 2017, prime rents in
2018 TAKE‑UP VS out-of-town Dublin take-up. This sector
saw take-up of 900,801 sq ft in 2018, 19% during 2018, currently standing at Development of new out-of-town office the Dublin out-of-town increased to
5‑YEAR AVERAGE was responsible for 38% of 2018’s
19% below 2017’s total but nonetheless 2.7m sq ft. Based on average take-up this buildings has continued to pick up, €30.00 per sq ft. This level was recently
take-up, almost half of which was in the
on par with the five-year annual equates to 3.0 years of supply. with 712,451 sq ft of new space under confirmed by PLR Worldwide Sales’
Sandyford area. Gaming company PLR
0%
average. Grade A space accounted for construction at the end of 2018, up 22% leasing of Red Oak at South County
Worldwide Sales leased 17,562 sq ft at Grade A supply accounted for 48% of total
only 35% of activity, impeded by the year-on-year. Business Park.
Red Oak, South County Business Park availability, boosted by developments
decrease in availability noted at the end Speculative development is strongest in
and Vizor Software leased 10,204 sq ft at under construction and due for delivery Activity in the out-of-town office
of 2017. this market, with a number of buildings
The Atrium, Sandyford Business Park. by year end. A number of buildings investment market was strong during
In a further endorsement of Sandyford with large floorplates are immediately under construction and not yet pre-let. 2018, totalling over €200m. This was
Business District’s credentials as a available including 186,000 sq ft at The At Sandyford, Highfield House (238,000 boosted by the €101m sale of the
YEARS OF sq ft) and The HIVE (formerly Ballymoss
tech location, Google’s expansion into Atrium and 100,000 sq ft at Block I, Facebook occupied Beckett Building to
SUPPLY House, 56,500 sq ft) are both due for
two buildings here were the largest Central Park. South Korean based Kookman Bank,
lettings of 2018. Google leased 52,925 completion this year. reflecting 4.13% NIY. This yield largely
3.0
Two prominent new build schemes
sq ft at The Chase and 48,522 sq ft at Planning permission and detailed reflects the long-income nature of
imminently scheduled for completion are
the Blackthorn Building. specifications are in place for further the asset with notional prime yields
One South County (140,000 sq ft) and Two
development, specifically the continuation remaining stable over the last 12 months
Dublin Airport Central (117,000 sq ft).
of large developments already underway. at 6.00%.
Construction at Dublin Airport Central is
proceeding on buildings Two and Three,
GRADE A SHARE with permissions in place for Four and
OF SUPPLY TAKE-UP (000 SQ FT) TAKE UP BY SECTOR (%) Five (200,000 sq ft). With the completion
of the first building forthcoming, Infinity
48%
1,200 TECHNOLOGY, Capital plan to bring forward Two and
MEDIA % Three South County (132,254 sq ft).
TELECOMS
AVAILABILITY (000 SQ FT) UNDER CONSTRUCTION (000 SQ FT) PRIME RENTAL VALUES FORECAST (€ SQ FT)
1,000
38
5-YEAR AVERAGE
PRIME 3,000 800 35
YIELD
800 FINANCE, 700 30
2,500
6.00%
BANKING %
14 INSURANCE 600
25
2,000
600 500
13 PHARMACEUTICAL,
1,500 400
20
5 MEDICAL %
HEALTHCARE 15
Q4 2018 PRIME HEADLINE
RENT (PER SQ FT)
400 5 PROFESSIONAL 1,000
300
SERVICES 10
200
24
€30.00
200 PUBLIC SECTOR, 500 5
NOT-FOR-PROFIT, 100
CHARITIES
0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019 (f)
2014
2015
2016
2017
2018
Q1 2019
2014
2015
2016
2017
2018
0
2014
2015
2016
2017
2018
Grade A Grade B/C OTHER Grade A Grade B/C Speculative Pre-let
24 Data source LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 25IRELAND OFFICE REPORT 2019 TOCS 2018 TOTAL OFFICE COST SURVEY THE DEFINITIVE GUIDE TO UK OFFICE COSTS • Easily view and compare location costs • Check office costs are in line with market rates • Benchmark against other UK locations Visit lsh.co.uk/tocs to find out more 26 Data source: LAMBERT SMITH HAMPTON © LAMBERT SMITH HAMPTON 27
STUART DRAFFIN Head of Agency – Belfast +44 (0) 28 9026 9215 sdraffin@lsh.ie GREG HENRY Associate Director – Agency +44 (0) 28 9026 9265 ghenry@lsh.ie JOE O’DONOGHUE Director – Office Advisory +353 (1) 673 1425 jodonoghue@lsh.ie DONALL MCCANN Head of UK Regional Capital Markets +44 (0)28 9026 9220 dmccann@lsh.ie RYAN DEAN Head of Office Agency +44 (0)20 7198 2269 aramshaw@lsh.co.uk CLAIRE COLE Senior Research Analyst – Ireland +44 (0)28 9026 9235 ccole@lsh.ie © Lambert Smith Hampton 2019. Details of Lambert Smith Hampton can be viewed on our website www.lsh.co.uk This document is for general informative purposes only. The information in it is believed to be correct, but no express or implied representation or warranty is made by Lambert Smith Hampton as to its accuracy or completeness, and the opinions in it constitute our judgement as of this date but are subject to change. Reliance should not be placed upon the information, forecasts and opinions set out herein for the purpose of any particular transaction, and no responsibility or liability, whether in negligence or otherwise, is accepted by Lambert Smith Hampton or by any of its directors, officers, employees, agents or representatives for any direct, indirect or consequential loss or damage which may result from any such reliance or other use thereof. All rights reserved. No part of this publication may be transmitted or reproduced in any material form by any means, electronic, recording, mechanical, photocopying or otherwise, or stored in any information storage or retrieval system of any nature, without the prior written permission of the copyright holder, except in accordance with the provisions of the Copyright Designs and Patents Act 1988. Warning: the doing of an unauthorised act in relation to a copyright work may result in both a civil claim for damages and criminal prosecution. 28 Data source: LAMBERT SMITH HAMPTON
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