Paul McNeive: Don't forget leisure schemes
OVER many years of brainstorming masterplans for new developments, the last use suggested for a scheme was usually "leisure/hotel." This was usually an effort to fill up one of the last units on the site and to demonstrate some creativity in front of the developer. However the leisure sector has developed and now plays a far more important role in the tenant-mix on any scheme.
As dozens of new business parks and retail schemes were rapidly planned and developed through the "boom years", there was shallow expertise in the hotel sector in particular.
I think it's fair to say that most agents had no great understanding of the sector but they were overwhelmed by enquiries from hotel chains. I found a similar lack of expertise in the accountancy profession.
There were tax incentives for developing hotels and the result was that dozens of hotels were built in non-viable locations where they subsequently failed.
Partly as a result of the unwinding of that mess via NAMA, several agents have developed a real expertise in the area and that experience will stand to the market.
Whilst hotels should never be developed as "loss leaders" on a scheme, a hotel is enormously attractive to office occupiers as it provides bedrooms for visiting personnel, restaurants, bars and conference facilities. Declan O'Reilly at Knight Frank agrees that an on-site hotel is very important to attract the right type of occupier to a large "out of town" scheme.
As an example he cited the importance of Bewleys Hotel to the success of Central Park, Sandyford and feels that the on-site hotel contributed to occupiers' decisions to choose Central Park over other locations.
Declan O'Reilly also notes that an on-site hotel allows occupiers to more efficiently lay out their own offices, with less need for large meeting rooms which are rarely used. If a hotel is not on-site, it should be no more than walking distance away and staff welcome an alternative to eating lunch in the office canteen.
The fastest growing area in the leisure sector is the gym/fitness centre and it is vital for developers to provide a gym on-site if there is no good operator located very close by. Paying rents of €100-€150 per sqm, fitness centres will never be a rich source of income to developers but they are an essential part of the mix on large office and retail schemes.
The collapse in property values has seen many operators securing great deals in long vacant office buildings or on the upper floors of retail schemes where values are lower.
I had an insight into the fitness centre business recently when énergie fitness invited me to speak on customer service to their owners and managers at their Drogheda conference. They operate 16 centres in Ireland and the newest has just opened at Mahon Point, Cork.
Managing director Innes Kerr told me that their focus is keeping members motivated by building in personal training sessions, frequent reviews and group activities.
Stephen McCarthy of Savills told me that fitness centres on retail schemes serve to attract useful footfall at "off-peak" times, in the early morning and evenings. "Whilst Dublin city is becoming saturated there are still good enquiries for 300-400 sqm units targeting office workers." Bowling, arcade games and children's activity centres are other occupiers and Leisureplex will open a new 2,300sqm unit at Charlestown Shopping Centre on the M50 later this year.
Larger office occupiers frequently provide their own gyms and indeed watch out for Savills staff flexing their muscles on Molesworth Street following their move this week to larger headquarters which incorporate a basement gym.
Multiplex cinemas are a business surviving recession better than most and they are another generator of footfall. Rents are in the range of €100-€200 per sqm for a shell finish and reviews are often linked to inflation.
Karl Stewart at DTZ told me that there are enquiries from operators for prime Dublin sites and particular interest in Cork and larger midlands towns.
Interest in running is at an all time high and agents tell me that large occupiers are looking for accessibility to suitable areas.
The open space provision on out of town schemes scores here and I predict that the next scheme to be developed will incorporate a running track.
Whilst never providing the higher returns, hotel and leisure uses will play an increasing role in attracting tenants and shoppers to commercial schemes.