East Point thrives amid city centre office shortage
Published 02/06/2016 | 02:30
On a sunny day at full tide East Point Business Park with its waterfront setting, looks an idyllic work place.
On one side is Dublin Bay and on the other is the River Tolka so many of the 7,000 people working there can enjoy a lunchtime stroll along the seafront while others can stretch their legs with a run to Clontarf.
The park has also seen a surge in rents in the last 12 months as vacancy levels have been reduced from 25pc four years ago to 4pc at present following expansions by existing occupiers and new arrivals. Occupiers range from tech companies such as Google to financial service companies such as Deutsche Bank.
Office rents have more than doubled from a low of around €10 per sq ft in 2012 to around €22.50 per sq ft for a recent letting. Will McCabe of EastPoint, which developed the office park and manages a number of buildings there, says that much of the rental growth was seen during the second half of 2015.
Eoin Conway of Weir & Conway, who is currently marketing a building in the park, believes there is scope for further rental growth and expects rents to reach €30 per sq ft by the end of 2017 if current trends continue. "When you consider that less than 2kms away rents of €55 per sq ft are being quoted for space in the IFSC, then there appears to be plenty scope for further rental growth in East Point," he adds.
Prices have also been increasing. In 2012 they fell to around €1,100 per sq m. when Block W was sold. Then in October 2014 Irish Life Investment Managers sold Block P2 for €8.5m to a joint Irish and overseas investment group.
The price was reported subsequently to be the equivalent to €1,829 per sq m (€170 per sq ft) for the 4,611 sq m block. At the time digital cable firm UPC, was paying over €1m in annual rent suggesting a net initial yield of 10.5 pc.
Then last November Block G, a modern, three storey, third generation office building extending to 26,500 sq ft with 49 car spaces, was sold for €4.95m or almost €2,013 per sq m.
Michele McGarry of Colliers, who acted for a local consortium which was selling the building, recalls strong investor interest due to the 30pc increase in rents over the previous 18 months. It was bought by Capital Assets on behalf of a Malaysian fund. At the time it was producing a rent of €162,000 but it had one vacant floor of 801 sq m. Its site includes 49 car-parking spaces and tenants comprised banking software company Misys and American gaming company Activision Blizzard.
Ms McGarry says that the net initial yield was in the region of 6pc "but its first and second floors were grossly under rented and so they offered opportunities to improve upon this at rent review or lease expirations."
East Point's original developer still has an interest in about 40pc of the 27 buildings in the park. Owner occupiers account for about 10pc of ownership, IPUT owns two buildings while ownership of the others is spread among syndicates of Irish and overseas investors.
Now the market is about to be tested again with the sale of The Arvato Building, Blocks J&K, for which Weir & Conway are guiding excess €21m. This follows the signing of a lease in April this year with existing tenant Arvato Bertelsmann at a rent of €1.4 million a year. That equates to a 6.4pc net initial yield. Arvato comprises a three storeys extending to 63,272 sq ft and comes with 110 surface car spaces.
Eoin Conway says the property could also offer further development potential subject to planning permission.
He says that many of the three storey buildings were built in such a way that a fourth floor could be added.
He also foresees a time when some investors may purchase some of the three storey buildings with a view to redevelopment up to six or eight storeys as has already been seen with the Pinnacle II building which was one of the last built during the boom.
However William McCabe does not see that happening in the near future. "Rents have not yet got to a level which could justify new development and construction inflation is currently running at 7 to 8pc," he points out.
East Point's vacancy levels are below those in the wider Dublin 3 area which includes Clontarf and East Point. John McCartney of Savills reports very strong net absorption of space in Dublin 3 where vacancy levels have more than halved from 24.1pc in Q3 2014 to 10.9pc in the first quarter of 2016.
"This dramatic tightening of the market is due, we believe, to the overspill of demand for good quality office space from the Central Business District," he said.
Unlike business parks such as Sandyford, all the EastPoint buildings work well with one another. The developer engaged architects Scott Tallon Walker to masterplan and design the park. McCabe explains: "Each building is different in form yet all use the same pallet of materials."
In a follow on joint venture with Dublin Port Company, the business park was expanded during the boom to about 40 acres and about 1.5 million square feet of office space.
It is easily accessible via the Port Tunnel and East link bridge and the management company operates a shuttle bus linking the park to both the Dart station at Clontarf and the Red line Luas at the Point Village. This accessibility is about to be further improved with the linking up of the Green and Red Luas line next year.