With a shortage of large-scale, modern office stock in Cork city centre and a newly discovered appetite for such space from potential occupiers, several developments are expected to commence in 2017. For most of the planned schemes, however, significant pre-lets are a must-have to get construction going.
According to a recent Cushman & Wakefield report, the current vacancy level in Cork — net of signed and reserved space — is 12.6%. This rate is expected to fall during 2017.
The report also estimates that modern office accommodation accounted for 95% of the 20,600 sq m of take-up in the 12 months to June 2016. It indicates that 80% of tenant demand during this period was focused on the city centre, reflecting lack of supply of larger modern office accommodation in the suburbs. Since then, availability of such space in the city centre has also been used up.
Interest in the city centre is a relatively new development and follows the delivery last year of One Albert Quay, a 15,400 sq m scheme built by John Cleary Developments (JCD) and now owned by Green Reit and occupied by Tyco, PwC, Investec, Arup and Malwarebytes. “Cork hadn’t a building in the city centre of that scale before One Albert Quay was delivered,” said Niall Guerin, Savills’ divisional director of commercial in Cork. “It showed there was demand for that type and scale of building and that’s echoed by the fact that it’s full.”
Cost is a particular attraction for potential occupiers. “Offices are less than half the cost of an equivalent city-centre location in Dublin,” said Guerin. “Rents in Cork have shown less variation and are more stable. Also, service costs, rates and car parking are probably about 50% higher in Dublin for equivalent office space.”
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Top rents in the city centre for new grade A buildings now exceed €323 per sq m, according to Peter O’Flynn, head of Cushman & Wakefield Cork. In the city suburb of Mahon, they’re about the €258 per sq m mark, dropping to about €215 in the suburban business parks, he said.
The challenge is shortage of supply. The only sizeable city centre block under development and due to complete in the second quarter is JCD’s The Capitol — or 14-23 Grand Parade as it has recently been rebranded — on St Patrick’s Street. It will deliver about 5,000 sq m of office accommodation over three floors, as well as up to 9,000 sq m of purpose-built retail space.
Facebook-owned virtual reality company Oculus has reportedly agreed to take the top floor of the building, which extends to 1,350 sq m. Infiniled, a spinout company of the Cork-based Tyndall Research Institute, was acquired by Oculus last October.
Letting agent Savills is quoting €358-plus per sq m for the office space. “Negotiations are ongoing but it’s been phenomenal in terms of the response to the building,” said Guerin. “The majority of the space is expected to be let on practical completion.”
On Copley Street and South Terrace, Dairygold-owned developer Watfore has full planning permission for the Trinity Quarter, a five-storey waterfront development that will deliver about 22,650 sq m of office space. Floor plates in the RKD- designed building will be up to 3,865 sq m, wrapping around an internal courtyard.
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“Discussions are ongoing to secure a pre-letting,” said Margaret Kelleher, director of general agency at Lisney, which is joint agent on the scheme with CBRE. “It’s likely that we’ll have one significant pre-letting, ideally for two floors.”
If it gets the go-ahead from An Bord Pleanala next month, work is expected to begin on O’Callaghan Properties’ 28,800 sq m Navigation Square office complex on Albert Quay by May. Designed by Henry J Lyons, the €90m scheme comprises four buildings on a 2.25-acre site.
“We are currently negotiating with contractors to allow a speedy start up of the project if the board rules in our favour,” said a spokesman for O’Callaghan Properties. “We are satisfied that we have enough occupancy secured to allow us to proceed with phase one of the project, which would be for 13,935 sq m of offices and attendant infrastructure and services. Phase one would take approximately two years to complete.”
The developer also has permission for a 14,000 sq m six-storey office building with ground floor retail on nearby Anderson’s Quay. “Pre-lets would be required for Anderson’s Quay but there already is strong interest,” said the O’Callaghan Properties spokesman.
Across the river at Horgan’s Quay, Clarendon Properties and BAM Ireland have appointed a design team for a mixed-use scheme on a 5.9-acre brownfield site next to Kent railway station. Clarendon and BAM were awarded the rights to develop the CIE-owned site after a tender process. The joint venture is expected to lodge a planning application in the first half of 2017.
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O’Mahony Pike is responsible for master planning and the office component on the scheme, while Wilson Architecture is handling the hotel design and Reddy Architects the residential elements.
Horgan’s Quay could potentially accommodate more than 40,000 sq m of office space and more than 200 build-to-rent apartments are also planned. “In order to leverage and attract multinationals and FDIs to consider Cork as a location, the provision of high-quality residential accommodation is key,” said a source close to Clarendon.
BAM also has permission for a mixed use scheme on Sullivan’s Quay to include a hotel and more than 11,000 sq m of office space. However, one source said the company will probably seek permission to build a larger hotel on the site once the nearby convention centre — also being built by BAM — is completed.
Outside the centre, a number of schemes have planning permission, with JCD’s City Gate Plaza in Mahon expected to be most likely to get going first. Permission has been granted for five buildings totalling more than 26,000 sq m of space.
Construction on the speculative development is due to begin imminently, said Guerin, adding that he expects three of the blocks — with up to 17,000 sq m of space — to be delivered by the end of the year.
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It will be the third phase of JCD’s City Gate development in Mahon, where current tenants include EMC, Qualcomm and Hedgeserv.
A bit further out, O’Flynn Construction has two suburban development sites. In 2010, the company got planning permission for four office buildings at Eastgate business park in Little Island. The first two of these have been built and are now occupied by Laya Healthcare and Eli Lilly, while construction on the remaining two — totalling 12,700 sq m — has yet to begin.
In Ballincollig, the company has permission for five blocks and potentially 24,500 sq m of office accommodation at Westfield Business Quarter.
“The suburbs are delivering options, but certainly the city centre is attractive to a lot of companies, depending on the profile of their employees and the type of office use,” said Kelleher. “There would have been a lot of demand in the suburbs because there wasn’t an offering in the city centre.
“Now, there are options in terms of live planning permissions in the city centre and also in the suburbs,” she said. “But it will be the win of a pre-let that will ensure that development takes place.”
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Guering said: “Pre-lets are the driver to getting tower cranes on site and getting these developments moved on. One Albert Quay has really put Cork on the map in terms of what can be delivered. But we need the next stage of development and the likes of Mahon and suburban locations.”