Ballsbridge is experiencing heightened development activity, spurred by increasing rents and a low vacancy rate

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Background

Ballsbridge is a prime office district commanding amongst the highest real estate values in Dublin. There is approximately 1.4 million sq ft of standing office stock in the area with a low prevailing vacancy rate of just 3%. Amenities in the area include The Aviva Stadium, The Royal Dublin Society and Herbert Park, with bars and restaurants catering to local office workers and residents. The location has significant hotel infrastructure including the 5-star InterContinental Dublin and the 4-star Clayton Hotel Ballsbridge and The Herbert Park Hotel.

Occupier Market

Ballsbridge 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 Avolan Aerospace Leasing.

While the financial services sector is well represented in Ballsbridge, the occupier mix is well diversified with companies from a broad base of sectors locating there. Reflecting the wider trend in Dublin, 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 there. As the TMT sector grows from its start-up roots, more of these firms will migrate from dockland locations to more mature markets such as Ballsbridge as they become more established. Finally, Ballsbridge is also popular with public sector bodies, with Eirgrid, The Higher Education Authority and The Law Reform Commission located there.

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 psf following refurbishment by owners Irish Life. Meanwhile, One Ballsbridge – which is due for completion in Q2 next year – has a quoting rent of €55 psf.

Investment Market

The rapid appreciation in rents have 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 Headquarters in a sale and leaseback deal in 2005 for €375 million.

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 rather than the rule in Ballsbridge with the majority of holdings consisting of sophisticated professional property investors. German fund Patrizia’s purchase of The Oval earlier this year for €140 million represented another significant entrance of a foreign investor to the Ballsbridge market. Other notable deals have significant development potential such as Irish Life’s recent purchase of Hume House from Blackstone for €35 million and their purchase of Alexandra House for €34 million in Q1 2015 from Nama.

Future Development

A significant supply response is also underway in Ballsbridge, a process which began with a number of significant land deals in the 2000’s. During this period, Ballsbridge was at the centre of a bidding war as developers fought for ownership of Ireland’s most valuable land, in what became known as the battle for Ballsbridge. Due to the scarcity of the supply of land in Ballsbridge, prices reached extremely high levels, peaking at €195 million per acre for Hume House in Q3 2006. As a result of the crash, the majority of these sites were never built out and were re-traded years later at a much reduced value per acre. Today’s construction activity in Ballsbridge is focused on delivering these schemes to address the space shortage in the market, with up to 765,000 sq ft of office space due to come on stream in the coming years.

It should be noted that there is extremely limited scope for further future development in Ballsbridge once these projects have been developed, as there is a scarcity of land capable of accommodating large schemes. Currently underway is the development of One Ballsbridge by the Comer Brothers. The development is situated on the former 2.02 acre Veterinary College site which they purchased for €22.5 million in 2013. One Ballsbridge will consist of approximately 135,000 sq ft of office space and will also accommodate retail, leisure facilities in addition to high-end apartments. As mentioned earlier in this report, Ronan Group Real Estate recently received planning permission for the redevelopment of four office blocks across from the RDS which was purchased for €67.5 million in 2015. The scheme will have approximately 331,000 sq ft of office space.

The current office construction activity should not be viewed in isolation, rather it is part of a wider once in a generation urban revitalisation that is ongoing in the area. Of particular significance is the redevelopment of the 6.8 acre former Ballsbridge hotel site which was purchased by The Abu Dhabi Investment Authority (ADIA) for €170 million. The redevelopment has planning permission for the construction of 568 top-end apartments, a 152-bedroom hotel and associated commercial space.

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