Tech sector driving office market towards new highs
On the week of the Web Summit it has been made clear that the IT sector is also the key driver of Dublin's office market, well ahead of the financial services sector and looking set to see the highest growth in occupancy levels in 10 years.
The sector is also setting new trends in office design with its back to basics style helping to transform the ambience for employees. In turn Irish landlords and developers are beginning to change their design specifications to cater for the creative staff.
"As IT employers like to keep their employees happy and proud of where they work, some of them organise their buildings in a more democratic style," explains Ronan Corbett of DTZ Sherry FitzGerald.
For instance while financial services companies might reserve the upper floors on a hierarchical basis with penthouse suites for their top management, in contrast tech companies prefer to locate staff facilities such as canteens or break out areas on the upper floors so that all employee can share the views. They also like extra showers and parking for bikes.
Corbett, who is director of business space with DTZ, says that they are also setting new trends in fit outs. Because they prefer large floor plates of 20,000 to 30,000 sq ft but in most offices this could in result yards of bland same looking, suspended ceilings.
As an alternative to partitions, the IT firms opt for exposed overhead beams, suspended lighting and thus the fittings vary the office environment, create a sense of place in different areas on the same floor, add to ceiling heights and all in all make them more interesting work places.
When Google bought the Monte Vetro office building on south docks the ceilings had not been installed which suited the new owner. Facebook also requires exposed beams in its offices.
But this does not mean that the developer can save on fit-out costs. Because employees need to feel safe and are not distracted by concerns that stuff could fall on top of them, it's also important that the cabling and insulation etc looks secure and tidy. Corbett says this can be as expensive as installing suspended ceilings.
Not all developers have been happy with this approach as at least one felt that it would prove more difficult to re-let the building with exposed beams and the like.
However Corbett believes this is changing. "Increasingly developers are coming around to accept the change in specifications," he says.
The requirements for large floor plates is due to the need for flexibility in allocating space to suit their collaborative work in teams, some of which can be over 50 people. The firms also want presentable reception and common areas with good fit out and natural light as well as reliable air conditioning which doesn't break down.
Locations such as the south docks and East Point Business Park have been very successful in attracting IT companies because they are planned, attractively landscaped and have waterside walkways.
But some firms are also moving into modern offices in the traditional parts of Dublin's central business district. For instance LinkedIn announced recently that it plans to develop offices next to its existing Wilton Place offices close to the Grand Canal, while Dropbox and Yelp have taken space in Hatch St.
Deirdre Costelloe, office agency director JLL, says IT firms like quirky buildings rather than glass boxes and when they can't get those they create quirky interiors by hanging lamps, exposed brick work and collaborative spaces.
The IT sector took 57,200 sq m of office space in Dublin during the first nine months of this year up. This represented a record 45.2pc of the market, as opposed to only 13pc for financial services, according to James Nugent of Lisney. "Consequently IT looks set to take more space in the full 12 months of 2014 than it has taken in the last 10 years exceeding the 63,200 sq m take-up of 2011," he adds.
"Rental property costs are not necessarily the most important issue for this sector.
"While tax is the major factor, some sizable US companies spend nearly as much on staff facilities and food as they do on rent.
"The availability and proximity to the right staff is paramount and this has contributed to their clustering in the city centre," he says.
"The staff profile of Google, Facebook, Twitter, LinkedIn and Yahoo! probably has differences, but all of these companies picked city centre locations," Nugent says.
Their demand has helped to reduce the Grade A office vacancy rate in Dublin 2/4 to an all-time low of 1.9pc according to Enda Luddy, managing director CBRE.
It is also pushing up prime rents in Dublin 2/4 which he says grew by more than 28pc during the first nine months of 2014 and by almost 50pc on an annualised basis. Prime headline quoting rents in the capital have reached €45 per square foot.
Other recent IT transactions in the D2/4 areas include Facebook's reserving an additional 11,687 sq m at 5 Grand Canal Square, behind their headquarters building in Dublin Docklands. AirBnB plans to occupy 3,228 sq m at The Watermarque building in Dublin 4 and Amazon taking 3,030 sq m at Burlington Plaza.
But some of the firms are also locating elsewhere in Dublin. For instance Workday are to lease 7,896 sq m at Kings Building in Dublin 7; International Financial Data Services (IFDS) is taking 3,060 sq m at Bishops Square, Dublin 8 and Sandisk are to lease 1,161 sq m at Ryanair's Concourse building at Dublin Airport.
Microsoft is to develop offices near its Sandyford building in Dublin 18 where Salesforce is also taking space.
However agents believe that in the most recent expansion phase, the suburbs have been slower to benefit from increased demand.