Flexible office space has capacity to expand and meet demand instantly
Traditionally regarded as a tertiary sector, serviced offices has rapidly developed into an important part of the property market and the economy. Now also known as 'flexible offices' and 'co-working', the sector is growing quickly in Ireland and could become a basic requirement for developers to include in their portfolio. To find out more, I met Joe McGinley, CEO and founder of Iconic Offices at one of their facilities, The Brickhouse on Lower Mount Street, Dublin 2.
McGinley's background is as an estate agent and he ran the Bespoke firm before selling it to a competitor. He launched Iconic Offices in 2013 and already operates from 16 buildings in Dublin, probably making it the largest provider in Ireland. McGinley told me the collapse in office rents during the recession presented an opportunity and he leased his first property, a Georgian building on Lower Baggot Street, for €110 per sq m. "At the time, the rental value of the apartment on the top floor was the same as the total rent payable for all the office floors," he said. His idea was to take large spaces and re-let them in small units to small and medium enterprises.
The upturn in the economy and the shortage of office space soon saw office rents rising, but the explosion in demand from overseas companies establishing here, expansion by domestic companies, and an ongoing shift in the market towards shorter and more flexible leasing terms, has seen the business expand and develop.
Iconic has taken 25-year leases on most of its buildings and typically spends over €1m in fitting out each facility. While their first spaces were in Georgian buildings, the last six deals have been in 1970s and 1980s buildings, at rents of up to €400 per sq m, and they are now also looking at new properties. They typically look for a minimum of 2,000 sq m (21,500 sq ft) over as few floors as possible, and ideally in a standalone building close to public transport.
But serviced offices are no longer just about packaging out partitioned offices. McGinley told me that central to their offer is the creation of a sense of community and collaboration, together with a diverse range of product and cost. There is a heavy emphasis on design.
"Every one of our spaces is different - we never reproduce the same look and feel," McGinley said. Iconic design, manufacture and workshop all of their own furniture, such as funky phone booths for private calls, and the spaces are decorated with modern Irish art.
Each building has its own 'community manager' to "nurture the spirit" of collaboration between the tenants by encouraging occupiers to mix and develop ideas, and by arranging networking and business speakers. "We provide space for progressive innovators, with big growth plans," McGinley told me. "We provide the funky, playful space that companies need to offer, in order to hire top talent."
Not surprisingly, there is a big emphasis on providing cutting edge IT facilities and there are multiple virtual private networks (VPNs) into US cities. Occupiers can avail of full-time reception staff, security, continental breakfast, car and bicycle parking, break-out spaces and shower facilities, and every building has a bar with beer on tap. Every property operates 24 hourly, every day of the year.
The market has been lapping up the offer and Iconic's facilities have become an important part of IDA Ireland's landing of overseas companies. "40pc of our tenants are west coast tech companies and 40pc are in finance, mostly from overseas, from areas like aircraft leasing and banking," Mc Ginley said. Their largest tenant has 100 workspaces on a custom-built floor.
Occupiers take a licence, usually for six months to a year, and the average stay is two and a half years. Occupiers can also take co-working or 'floating desks' by paying a membership fee, from €249 per month, plus VAT, or can have dedicated desks from €349 per month, to include heat, light, and other services. Office space is from €500 per person per month.
The Brickhouse facility is a joint venture with Hibernia Reit. The relationship developed after Iconic leased Hibernia's SOBO Works building in Dublin's south docks. Several Iconic tenants have since gone on to become long-term tenants in Hibernia Reit buildings.
Iconic have just agreed terms on over 3,000 sq m (32,300 sq ft) within a couple of minutes walk of Grafton Street and are now looking at Cork, Belfast, London and Amsterdam. As Joe McGinley said: "It's sign today, and start tomorrow."