Sandyford, located 10 kilometres south of the city centre, is Dublin’s most important suburban location and is comprised of three key distinct business parks:
• Sandyford Industrial Estate
• Central Park
• South County Business Park
Originating as an area characterised by low-rise, low-density manufacturing sites, Sandyford’s evolution as an office location can be traced to the early 1990s when warehouses in Sandyford Industrial Estate began to be converted for office use. In 2001, the first offices in Central Park were launched, with the park since becoming one of the best examples of integrated development in Dublin. The development of the new 372,000 sq ft Microsoft Office Campus marks the next stage of Sandyford’s evolution, with the extensive presence of the world’s second largest company in South County Business Park expected to draw further occupiers to the area.
Q1 take-up in Sandyford reached 58,000 sq ft indicating that 2016 will see another strong year of activity, and may even exceed the record level of 208,000 sq ft recorded in 2013. The vacancy rate has declined strongly to currently stand at 8.2%, although this masks variations between the different parks with Central Park fully let since July 2015.
Salesforce’s two lettings in Central Park, executed in Q1 2013 and Q1 2016 respectively, provide a good benchmark with which to judge the recovery in the Sandyford market over the last three years. During this period, the rent paid by the cloud computing giant rose from €16.50 to €27.50 psf, an increase of 67%. Elsewhere, Suntory’s letting of was substantially increased upon when Mars Ireland let 12,300 sq ft in Q2 2015 for €22.50 psf. Current quoting levels for Sandyford Industrial Estate include €27.50 psf at The Atrium and €25.00 psf at Blackthorn House, the latter having just underwent a €1.6 million refurbishment by owners Irish Life.
The recovery in the Sandyford market can be attributed to a number of push and pull factors. The declining availability and strong rental appreciation in the city centre has undoubtedly played a key role, with the current prime city centre rent of €57.50 over the double the equivalent in Sandyford. On the pull side, Sandyford’s excellent transport connections with the city centre via the Luas, and the rest of the city via the M50, means the area is well positioned to capture those occupiers seeking a suburban home.
Furthermore, while the demand for office space in the city centre is dominated by the technology, media and communications (TMT) sector, take-up in Sandyford comes from a more diverse range of occupiers, with industries such as pharmaceuticals playing a more important role.
As the economy continues to grow, companies are outgrowing their existing offices and are seeking larger buildings to enable their expansion requirements, something which Sandyford facilitates. This was illustrated by Innopharma Labs, who in 2012 rented 2,551 sq ft in Q House before taking an additional 17,459 sq ft in the Ravenscourt Building in 2015.
As occupier activity rebounded and rents increased, Sandyford has attracted significant attention from institutional buyers which marks a break from the investor syndicate ownership structure of the past. The most significant purchase of the last number of years was Green REIT’s phased acquisition of Central Park. In 2014, Green REIT teamed up with PIMCO to purchase the investment and development element of Central Park for €310.0 million with Kennedy Wilson assuming ownership of the apartments in a separate €82.0 million deal. Green REIT purchased the remaining 50% share from PIMCO for €155 million late in 2015 at an equivalent yield of 5.6%. Blackstone, under bidder for Central Park, bought The Atrium building, which extends to 346,000 sq ft, for €100 million in Q4 2014.
Kennedy Wilson has also been active in acquiring office buildings in Sandyford, having recently purchased the 175,600 sq ft Chase Building for €62.5 million at a yield of 4%. Investments such as Central Park, The Atrium and The Chase represent attractive opportunities for institutional investors as there is significant scope for value-add asset management through the reconfiguration of space, leasing-up of voids, rent reviews and the re-gearing of leases.
Recent improved market fundamentals of declining vacancy and rental appreciation have made building viable once again in Sandyford. At Central Park, work on the remaining 7.4 acres of development potential has commenced with the delivery of 150,000 sq ft at Block H expected by the end of the 2016. Block I is the next phase scheduled to be developed, with potential for a further 82,000 sq ft of office space.
Irish investment firm, Ardstone Capital, has been particularly active in acquiring sites with development potential in Sandyford Industrial Estate. In addition to plans to develop up to 300,000 sq ft at Burton Road, Ardstone are also seeking to construct 450,000 sq ft of office space in a development labelled ‘Eden Plaza’ along Blackthorn Avenue following the purchase of the 5.06 acre site for €6.5 million last year. In an indication of how far development land prices have fallen since the peak, the site was sold for €70 million in 2007, a price at the time that was considered somewhat soft given that the guide price was pitched at €90 million. Developer Noel Smyth has also submitted plans to redevelop Innovation House which will involve replacing the existing two-storey building with a six-storey over basement office block with a gross floor area of 227,000 sq ft. Meanwhile, 286,000 sq ft is to be developed at the entrance of South County Business Park which will see the demolition of the existing Media House and Infinity House.
Finally, work has already commenced at the adjacent site where Microsoft are building their state of the art campus, which will bring all the Microsoft staff currently housed in three different buildings in Sandyford under one roof by the end of 2017. Building 2, currently tenanted by Microsoft, has just come to market as an investment/development opportunity. With Microsoft set to exercise their rolling nine month break option in anticipation of the completion of their new campus, the sale provides the opportunity to increase the site footprint from 87,000 sq ft to 300,000 sq ft.