Wednesday 23 October 2019

Demand for offices helps boost rent and deals in Sandyford

Corrig Court
Corrig Court
Silverstone House
Donal Buckley

Donal Buckley

As much as 538,900 sq ft of offices are currently being built in the Sandyford Business District in south Dublin as the office vacancy rate in the area has fallen to only 3.1pc. Not alone is there demand among office occupiers for space in the area but there is also demand among investors.

This is reflected in two deals that have recently been agreed on the sale of two fully-let office blocks. Corrig Court and Silverstone House are being sold by Irish firm McGarrell Reilly Group, which is reported to have bought them for about €15 million in 2015 and subsequently invested in their upgrade.

Joint agents Savills and QRE have been asking more than €23.8 million for the two four-storey-over-basement buildings. Corrig Court is slightly larger, with a floor area of 3,558 sq m (38,293sq ft) and 78 car-parking spaces. Silverstone House extends to 2,820sq m (30,357sq ft) and has 66 car spaces.

Corrig Court is fully occupied and produces a rent of €907,660 from a tenant line-up that includes Cubic Telecom, BSI Cybersecurity and Information Resilience and Micro Focus and these rents equate to an average rent of €21.50 per sq ft.

Silverstone House is fully let to top-rate tenants, including the Health Service Executive, Sherry FitzGerald and O'Dwyer Property Management, at an overall rent roll of €812,723. One of the tenants in Silverstone, data analytics firm Truata, is paying €24.50 per sq ft.

It is considered to have further development potential, subject to planning permission, having previously had approval for an additional penthouse floor.

The agents also guided in excess of €12.3 million for Corrig Court beside Beacon South Quarter and €11.5 million for Silverstone House for possible separate sales, equating to net initial yields of 6.8pc and 6.52 pc respectively.

Since those rents were agreed there have been higher rents achieved in the district. According to the latest office report from another agent, Knight Frank, the area's low vacancy has seen rents double from the mid-teens to now stand at €30 per sq ft.

Meanwhile, yet another agent, CBRE, says rents in the suburbs have experienced an increase over recent months with prime rents in the south suburbs now in the order of €317.42 per sq m, or about €29.50 per sq ft. They compare with around €700 per sq m in prime city centre properties, €226 per sq m in the north suburbs and about €193.68 in the west suburbs.

According to Knight Frank, those €30 per sq ft rents were seen in three recent Sandyford deals, most notably when Facebook agreed to take 174,000 sq ft at Nova Atria South, formerly part of the Atrium complex. Rents at that level were also agreed by PLR WorldWide for 17,562 sq ft at Red Oak South in South County Business Park and by Salesforce for 25,540 sq ft at Building G in Central Park.

John Ring of Knight Frank says there are three office locations in the business district, each with distinct personalities. "Central Park has benefited from being under single ownership control which has facilitated integrated place making. South County has a campus feel while Sandyford Industrial Estate retains a mix of uses, with office use particularly concentrated on its northern edge in proximity to the two Luas stops," Mr Ring said.

"Sandyford's appeal is due to being situated in a relatively affluent area of south Dublin while simultaneously being suitable for high-density office development and enjoying good transport links to the city centre," he added.

Developments currently under way include Green Reit's Building I at Central Park, which will extend to 103,400 sq ft; Cyril McGuire's One South County, which extends to 141,000 sq ft; and Aldgate's Termini, which extends to 221,523 sq ft. British developer U+I is also revamping a building which it has re-branded The Hive and which will have 72,945 sq ft.

Demand for offices in the district is also reflected in plans to develop a further two million sq ft of offices. These include Cyril McGuire's plans for two new buildings at South County, Green Reit's plans for Building N at Central Park; Aldgate's plans for Leopardstown West and ESB's plans for its site.

Meanwhile, investment fund Ardstone has changed its mind about selling its Eden Plaza site, which has permission for 450,000 sq ft and which had a €20m price tag.

Development is also continuing on the residential side. According to Sandyford Business Improvement District (SBID), the Government-authorised organisation for the area, as many as 5,000 people already live there. Ireland's largest private landlord Ires Reit, which already has five properties in the district, is about to submit a new planning application for about 428 apartments at the Rockbrook development, following a previous rejection from An Bord Pleanála at the Sandyford site.

It is also hoping that the planning watchdog will respond positively by June to its application for 84 units at block B4 at Beacon South Quarter.

A further 459 units may be developed in the neighbouring Sandyford Central site by real estate investor Avestus Capital Partners and asset manager Ares Management. They bought the 3.81 acre site for about €38 million in a deal brokered by Cushman & Wakefield. Meanwhile, Swedish student accommodation specialist Prime Living is also awaiting an An Bord Pleanála decision on its application for an 817-bed-space project at the Avid Technology site on Carmanhall Road.

Ironically, despite the 26,000 people working in the district and the 5,000 residents, the SBID area does not have a pub. Conor Battigan, chief executive of SBID says that this reflects the change in people's lifestyles, as it has a number of fitness centres.

"However, it does have a number of licensed restaurants, including Press Up's Union Cafés, a bar in The Beacon Hotel and Naomh Olaf's GAA club."

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