Dublin's Docklands proving to be a high-powered engine of recovery
As Google closes in on the acquisition of both the €170m Boland's Quay project and the Treasury Building, for which it is set to pay in excess of €120m, it might be time we renamed the area now commonly known as 'Googletown' as 'Google City'.
Because once these two deals, the details of which were first revealed by this newspaper and its sister title the Irish Independent, are concluded, the US web giant will own and control a vast portfolio of prime Dublin property stretching from Grand Canal Street almost to the banks of the River Liffey.
While Google's first acquisitions in the area date back to 2011, when it snapped up its European headquarters on Barrow Street and the nearby Montevetro Building for €100m and €99m respectively, its history in Dublin's docklands is a long-standing one, relative to tech industry peers.
Google's pioneering decision to establish its European headquarters in Dublin in 2003 (a year before its IPO) is acknowledged in a special report on the Dublin Docklands contained in Knight Frank's latest quarterly review of the Dublin office market.
The author, head of research John Ring, notes the "deep roots" which Google and that other tech giant, Facebook, have established in the Docklands since then, with the two employing over 9,000 personnel between them in the area, making it by far the largest footprint either has outside of their Silicon Vally headquarters.
Leaving aside his recording of the success Dublin has enjoyed with both Google and Facebook, Ring's research for Knight Frank details the extraordinary performance of the city's docklands area.
Since the property market started to recover in 2012, the Dublin Docklands has accounted for around 3m sq ft, or 22pc, of the total market.
In 2012 itself, the Docklands' share of market activity was even higher, accounting for a massive 31pc.
Early deals of note included Facebook's letting of 121,000 sq ft at Grand Canal Square for €35 per sq ft in 2013. The figure represented a premium of €5 on the €30 per sq ft agreed by Capita when it took 43,000 sq ft at 2 Grand Canal Square during the trough of the market a year earlier.
In an indication of just how well the market has recovered since, Ring refers to the €60 per sq ft rent in Q3 2016 when Citadel took up 18,250 sq ft at 1 Grand Canal Square.
Ring also indicates that the Docklands has the greatest investment liquidity in the Dublin market with no other area rivalling it for the quantum of large sales. Since 2013, there have been five office transactions valued in excess of €90m, including the largest ever office deal in Dublin with the sale of One Spencer Dock to Middle Eastern fund AGC Equity Partners for €240m in the second quarter of 2016, representing a price per sq ft of €1,059. This compares to a price per sq ft of €770 achieved for 1 Grand Canal Square when it sold for €93m in Q4 2013.
The current marketing for sale of No 1 Dublin Landings by Oxley/Ballymore at a price of €150m, or €1,034 per sq ft, meanwhile, is believed to be attracting strong international investor interest.
Ring says the appetite of investors for Dublin Landings is not only a function of the quality of the state-tenanted scheme but also a reflection of Dublin's transition from 'recovery' to 'core-market' status, which he says has occurred over the past year.
Turning to new supply, Knight Frank reports that there is currently 1.4m sq ft of space under construction in the Docklands, with a further 2.1m sq ft delivery potential from the area's remaining brownfield sites. In addition to the Dublin Landings scheme, significant developments include Ronan Group Real Estate's Spencer Place, Hibernia Reit's SOBO District and Kennedy Wilson's Capital Docks.
The report also points to the manner in which the North Docklands is now beginning to close the gap between it and the South Docklands in rents and yields achieved.
Referring to the future tenant profile of the IFSC, Ring says this is likely to change as the leases of finance companies who benefited from incentives to locate there expire. He cites the occupation of HubSpot at One and Two Dockland Central and the Food Safety Authority at The Exchange as being a sign of things to come.
Notwithstanding the vagaries of the economic cycle, Knight Frank expects the Dublin Docklands to further cement its reputation as prime location for investors.
Ring says: "A mark of the current cycle is that debt and equity funders are more location sensitive than in times past, a reflection of the liquidity needs of international money in managing market cycle risk. Already known as a prime location, the building-out of the remaining schemes will see Dublin's Docklands cement this reputation and further enhance the relative appeal of the area to core investors."