Offices all the biz in the Cork scene

IN the first five months of 2015, office activity in Cork has been dominated by the FDI sector, with five substantial transactions completed.

Offices all the biz in the Cork scene

These large lettings, which were between 10,000 and 25,000 sq ft, included acquisitions by Centrica, Brookfield, Opentext, Amerisource/Bluepoint, De Care and Radisen Diagnostic, which is an indigenous business.

Only one of these lettings occurred in the city centre, at City Quarter, while the others were in the east, west and south suburban business parks.

The ongoing development on One Albert Quay, which is weekly changing the city quayside landscape, coupled with the news that it has been acquired by Green REIT for between €55m and €58m, has dominated the office sector in Cork City centre. It is understood the remaining vacant space is under active negotiations with FDI and indigenous occupiers, and there is a strong expectation that the building will be fully let prior to the year-end.

The building can cater for various size requirements, and rents are increasing as the building fills.

One Albert Quay is shoring up any city centre enquiries, at present, that are seeking new third-generation office space in the short-term.

This is putting pressure on the existing vacant space, which extends to 70,000 sq ft, spread across a number of modern, 3G buildings in the city centre. These include City Quarter, nos 5/6 Lapps Quay, no 11 Anglesea Street and no 2 George’s Quay. Agents report some activity on a number of these units, but as they are detached from each other, the largest single floor plate is 16,000 sq ft. In some cases, there are possibilities of including adjoining floors in the buildings to increase potential space allocation.

On the South Mall, there were a number of smaller transactions, and reports indicate that deals may be pending at the refurbished no 12 South Mall. The sale/acquisition of substantial buildings, like nos 80a and 67/69 South Mall, shows confidence from institutional landlords that, once capital expenditure is invested to modernise these buildings, tenants will be secured. Enquiries from indigenous occupiers in both the city centre and suburbs have increased dramatically, but while there is a lot of vacant space available, a limited amount is suitable. The vacancy rate is at roughly 18.5%.

Grade A city centre rents are now between 23 and 26 psf. In the suburbs, headline rents are increasing and are now between 11 and 15 psf, with some exceptions. Rents in South Mall are at similar levels to modern 3G space in the suburbs, running at between 10 — 15 psf, depending on size and specification.

Activity and Trends:

As we emerge from the property and economic doldrums, the question is which scheme will emerge from the ground next — which developer can deliver a new third-generation office scheme post-One Albert Quay?

In the city centre, the next likely schemes will be either at South Terrace/Copley Street and/or Anderson Quay, where 160,000 sq ft and 150,000 sq ft are planned. It will likely be a prerequisite before development can commence that substantial pre-lets will be required. Will we need to see further increases of rent, above the 30 psf level, to ensure schemes are viable so that stakeholders will be willing to invest?

Of course, the Capitol cinema site, on Patrick Street, has a substantial amount of office accommodation, also, which could be delivered in the short-term, but this is a different proposition, as pre-lets of the retail space can underpin the scheme in tandem with the offices.

In the suburbs, JCD appears to be progressing with their plans for the 350,000 sq ft office development at Central Plaza, Mahon, and the development of another, 65,000 sq ft stand-alone building in Eastgate Business Park is on the cards, especially given that vacancy is particularly low there. Other possible new developments in the suburbs could take place in phase two of Cork Airport Business Park and in Ballincollig town centre. These have the capability of bringing 100,000 sq ft to the market in the short- to medium-term.

The old adage of ‘build it and they will come’ is not necessarily a sensible mantra but, as always, risk equals reward. As I experienced first-hand recently, with the Opentext deal in Cork Airport, FDI companies are prepared to pay for good quality space that meets their business needs, and they require flexibility that goes both ways. Landlords and tenants working together, in this now more complex market, inevitably leads to better long-term results for all.

Outlook

  • Further pre-lets on the remaining space at One Albert Quay imminent.
  • Uptake of existing city centre, 3G office units at Lapps Quay and other locations.
  • New office schemes to commence construction, based around substantial pre-lets and possible design-and-build options in both the city and suburbs.
  • Rents increasing in certain key locations in the city and suburbs.
  • Refurbishment and letting of older buildings in the city centre, with an emphasis placed on improving the South Mall.
  • Major regeneration in the city centre, on the back of the Capitol cinema site and events centre.
  • Key brownfield sites will see feasibility studies completed for mixed-use schemes, with a strong emphasis on office space.

* Paul Hannon is a senior surveyor and offices-specialist in Lisney, Cork

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