Cork gives FDI alternative to Dublin with new offices
Cork's office market has recovered to a level that has generated three major new city centre speculative developments and two more could get underway in the coming weeks.
The first of them, the €52m One Albert Quay on the south bank of the south channel of the River Lee, was completed by John Cleary Developments (JCD) last year for Green Reit. It is now fully let, with six Irish and international tenants. Green's annual report noted that two tenants, Tyco with 7,000 sq m (75,000 sq ft) and PricewaterhouseCoopers with 1,300 sq m (14,000 sq ft) were generating a combined €2.1m in annual rent.
JCD recently completed 5,000 sq m (54,000 sq ft) of offices at The Capitol scheme on a site that extends between Cork's two main retail streets, Grand Parade and Patrick St, while Oculus, a Facebook subsidiary, has reportedly agreed a pre-let to take about 1,400 sq m (15,000 sq ft) on the top floor of Capitol, where office rents have been pitched at over €30 per sq ft. Savills are the agents.
The most recent project to get underway is the €20m Camden Place development, which could extend the city's prime office district to the north quays of the Lee's north channel.
Stone Work Properties Ltd, whose directors include members of the Murphy-O'Connor architectural family, are due to begin building the 6,000 sq m (65,000 sq ft) Camden Place offices this month behind an original Venetian-style façade. This façade may have been inspired by the city's reputation for being Ireland's version of the island city of Venice.
Camden's joint agents Cushman & Wakefield and CBRE are offering floor plates ranging from 836 sqm (9,000 sq ft) to 1,530 sq m (16,500 sq ft) at rents of around €27.50 per sq ft.
Other schemes in the pipeline include O'Callaghan Properties' 29,000 sq m (310,000 sq ft) of offices at Navigation Square on Albert Quay. The company, founded by the late Owen O'Callaghan, is expected to hear from Bord Pleanala within days on whether it has got the green light and is expected to start work as soon as is feasible, even without a pre-let deal.
JCD is also expected to start building 26,000 sq m (280,000 sq ft) of suburban offices at City Gate Plaza in Mahon in the coming weeks and has appointed Savills and Cushman & Wakefleld as joint agents.
Back in the city centre, Lisney has been in discussions about possible pre-let deals for Trinity Quarter, a 2,100 sq m (22,800 sq m) five-storey scheme on the south bank of the river's south channel at South Terrace/ Copley Street. Watfore, a company owned by the Dairygold farmers' co-operative, is developing Trinity to provide floor plates of up to 3,900 sq m (42,000 sq ft).
Also extending the prime office offering on the northside will be the major mixed-use Horgan's Quay development, overlooking the confluence of the Lee's two channels. Design work is underway for the 6.1-acre site, which could accommodate more than 40,000 sq m (430,500 sq ft) of offices. Here, joint venture partners are Clarendon Properties, headed by Paddy McKillen and Corkman Tony Leonard, along with the Dutch construction firm BAM.
According to well-informed sources, planning permission is likely to be sought in the first half of 2017. Cork firm Wilson Architecture, will handle the hotel design; O'Mahony Pike, the master planning and office component; and Reddy Architects will do the residential sections. Sources close to BAM/Clarendon said: "In excess of 200 build-to-rent apartments are planned."
Michael O'Flynn also has planning permission for two substantial suburban office developments at East Gate and Ballincollig but is unlikely to start building until he has secured a pre-let.
In addition, Gerry Wycherley is expected to develop a new 6,500 sq m (70,000 sq ft) building at Site 2100, Cork Airport Business Park.
Edward Hanafin of Lisney says demand for high-quality, modern office space was strong in 2016: "This was particularly the case among indigenous occupiers seeking space in the city centre, where such requirements increased dramatically from 2015."
Seán Healy, director with Cushman & Wakefield's Cork office, concurs: "In line with the strength of demand for space and falling availability levels, prime office rents in Cork city centre at the end of 2016 increased to €290 per sq m per annum, up 16pc on 2015 levels. Looking to the year ahead, prime rents in the city centre are expected to achieve €315 per sq m by year end 2017."
Edward Hanafin of Lisney believes rental levels will need to exceed €323 per sq m (€30 per sq ft) to ensure viability of further office schemes.
Some investors and developers are opting for refurbishments, especially for properties on the South Mall, which had once been the core of Cork's prime office district. Film star Michael Fassbender and his family were among the first to spot the potential of the street's office properties after the crash.
Last year, three premises on the mall change hands. Local investors bought 1 South Mall for more than its €3m guide price and 24/25 South Mall for around €1.15m.
A company linked to JCD paid around €4m for 89/90 South Mall, part of which was let to KPMG. JCD undertook a refurbishment and let it to artificial intelligence company Cylance. Just beyond the mall, University College Cork acquired the Cork Saving Bank building at 1 Lapps Quay for over €1.4m and plans to open a city-centre business school.
Mr Hanafin says properties are still selling for below replacement cost and the returns available are attractive when compared to yields in Dublin. He expects demand for prime investment assets in the Cork region to remain strong. He says prime office yields ranged between 6.5pc and 7.5pc at the end of 2016.
He says: "We expect further capital value appreciation, although the rate of increase will slow. Many investment assets that were part of loan sales in the past three to four years will be offered for sale in 2017, as the international equity funds who acquired them will seek to sell non-core properties. Cork will continue to attract FDI occupiers as rents are competitive when compared to rates for similar accommodation in Dublin."