Dublin 4 rebounding from the bust to boom yet again

08 December 2016

As much as 71,000 sq m (765,000 sq ft) of office space is in the development pipeline for Ballsbridge, Dublin 4, the most sought after location for residential, office and hotel projects in Ireland. If all these offices are built, the total office stock in the area will jump by 55pc to more than 195,000 sq m (2.1 million sq ft). 

The strength of Ballsbridge's market is reflected in Knight Frank's latest Dublin office market report, which also identifies the key development land deals since the boom-time 'Battle of Ballsbridge'. 
 
In Q3 2006 Sean Dunne, who earned the sobriquet 'Baron of Ballsbridge', paid the equivalent of €195m per acre for Hume House. Then after the market collapse, the Comer Brothers bought the adjoining 2.02 acre former Veterinary College site in 2013 for €22.5m, or the equivalent of less than €11.14m per acre.
 
It could be argued that the 2013 price was less than 6pc of the price per acre paid by Dunne for Hume House, but such an argument would fail to recognise that Hume House was generating substantial rental income unlike the Veterinary College site. It also fails to take into account that Dunne acquired Hume House as part of his assembly of a bigger site, which already comprised the former Jurys and Berkeley Court hotels.
 
Earlier this year Irish Life, which sold Hume House to Dunne in 2006, bought it back from Blackstone with planning permission to more than double the office floor area from its present 7,600 sq m (81,804 sq ft) to 16,900 sq m (181,909 sq ft) in a new six- to nine-storey complex.
 
Irish Life paid around €35m, or the equivalent to €29.6m per acre. While that might suggest that development land prices in Ballsbridge had jumped more than 165pc in three years, it should be recognised that demand has also increased for existing offices in prime Dublin locations and indeed Irish Life's latest Hume House deal reflected a rental yield of 5.4pc.
 
The Comer Brothers are currently developing 12,500 sq m (135,000 sq ft) of office space on the Veterinary College site in a project branded as 'One Ballsbridge'. These offices are due for completion in Q2 next year and agents are quoting rent of €55 per sq ft. The site will also accommodate retail and leisure facilities in addition to high-end apartments.
 
The only other development actually underway is at 140 Pembroke Road a development of 2,300 sq m (25,000 sq ft), which is being undertaken for private investors for completion in the second quarter of next year.
 
Nearby at 10 Pembroke Place, D4P Holdings has planning permission for a further 2,300 sq m (25,000 sq ft).
 
But the biggest project is the 31,000 sq m (331,000 sq ft) of offices planned by Ronan Group Real Estate in 'Project Pegasus', the redevelopment of four office blocks, which was purchased for €67.5m in 2015, adjacent to AIB Bank Centre across from the RDS. 
 
Developer David Daly has also secured planning permission for 6,200 sq m (67,000 sq ft) of offices at the IPC House site on Shelbourne Road, to the south-east of Hume House.
 
Meanwhile, the Royal Dublin Society has received an extension until 2019 for the 9,400 sq m (101,000 sq ft) Pavilion offices at Simmonscourt Road, between its rugby arena and the Intercontinental Hotel.
 
While it remains to be seen how many of these will be redeveloped, the letting of One Ballsbridge as well as Brexit could provide catalysts.
 
Either way, as Declan O'Reilly of Knight Frank points out, Ballsbridge is a prime office district commanding some of the highest real estate values in Dublin. "Furthermore the prevailing vacancy rate is only 3pc. Grade A office rents in Ballsbridge have achieved levels that are on a par with the best locations in Dublin 2, and as such, have broadly mirrored the rapid appreciation in rents that have been witnessed in Dublin 2."
 
Buildings currently available include 3 Ballsbridge, which has a quoting rent of €57.50 per sq ft following refurbishment by owners Irish Life. 
 
"The area is popular with financial occupiers, a trend that was initiated by AIB's decision to build their landmark headquarters in Ballsbridge in 1979, with other Irish financial firms following suit through the years. For example, Ireland's oldest stockbroking firm, Goodbody, moved to Ballsbridge in the late nineties. As the financial industry in Ireland has evolved from traditional banking services to incorporate more specialist operators such as insurance, investment funds and aircraft leasing, Ballsbridge has attracted companies from these high-growth sectors. Examples include Zurich Insurance, AIG, Cardinal Capital, GE Capital Aviation and Avolon Aerospace Leasing."
 
Furthermore, the occupier mix is well diversified with companies from a broad base of sectors locating there. The tech sector has especially increased its footprint in Ballsbridge with firms such as IBM, Sony, Tableau Software, Wipro and Survey Monkey having all established a presence.
 
The rapid appreciation in rents has seen an increase in investor interest in office buildings in Ballsbridge, with the ownership structure dominated by institutional owners with a long-term investment horizon. Irish Life and IPUT own the greatest number of buildings, with the Serpentine Consortium having the largest market share in terms of square footage. The Serpentine Consortium purchased the newly developed portion of AIB's HQ in a sale-and-leaseback deal in 2005 for €375m. The consortium consists of high-net-worth individuals, with the syndicate structure of the deal typical of the market at the time.
 
This type of ownership structure is now the exception, with the majority of holdings consisting of sophisticated professional property investors. German fund Patrizia's purchase of The Oval earlier this year for €140m represented another significant entrance of a foreign investor to the Ballsbridge market.
 
O'Reilly sees current office construction activity as part of the area's revitalisation and points to the Project Trinity redevelopment currently underway at the 6.8 acre former Berkeley Court hotel site, which was purchased by Abu Dhabi Investment Authority (ADIA) for €170m or €25m per acre. This envisages 568 top-end apartments, a 152-bedroom hotel and associated commercial space.
 
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