THE COMPLETE COLLAPSE in the construction industry has led to a dearth of new home completions that are driving up residential rents at an extraordinary rate. Less talked about, but no less important in providing the jobs for all those residents, is the crimp on office space. According to a HSBC report there was demand for 220,000 square meters of new office space last year, but only 45,000 square meters is under construction.
Rents in Dublin soared by 30% last year, and will go from €45 per square foot to an estimated high of €60 per square foot by the end of 2016.
There are lots of offices sitting idle around both Dublin and the country, particularly in corporate and business parks that sprouted up during the boom. As is the nature of all quality problems, it is both fortunate and unfortunate that the types of companies coming to and expanding in Ireland do not want or cannot set up shop in these places.
We need more commercial space – and fast
Firstly, we are attracting a lot of several-hundred and thousand-plus employers who need a very substantial space to house their people. Google has famously been buying up Barrow Street seemingly from one end to the other to accommodate its appetite for hiring. Their latest €13 million purchase of the renovated warehouse called Dock Mill caps off well over a quarter billion euro worth of property purchases on the street to date. LinkedIn is expanding from 700 to 1,200 employees and has simply resorted to building its own new headquarters on Wilton Place, along the Grand Canal.
Airbnb, which started out in some charming Georgian terraced houses converted to office space only a little more than a year ago, is driving up on 500 employees with an investment to renovate a disused warehouse space at Hanover Quay to provide 40,000 square feet of office space.
There aren’t a lot of 40,000 square foot contiguous office spaces laying idle anywhere in the country. Furthermore, these companies are realistically not going to set up shop outside of a few of our cities. Indeed, many of the tech companies that are the jewels in our foreign direct investment crown won’t set up anywhere away from line of sight to Google’s tall centrepiece building.
Companies want to pitch their tents together for good reason
This may sound like trendy pique, but it makes good business sense. The trading of employees between these companies here and in Silicon Valley itself is rife, as are the business connections between them. Even arch-rivals like Google and Facebook are finding room to work together on various projects, and there is also a strong history in tech of spin-off companies coming from the titans or being acquired by them (or both). Smaller tech companies want to pitch their tents in the vicinity of these giants so they can hire from their midst or get onto their radars for future business dealing.
We hearing wailing about how the IDA fails to bring investment to the regions, but the fact is that if there’s a choice between investment in a very small geographic area or no investment at all, it’s not a choice.
In the olden days we would set up a manufacturing facility anywhere at all, on the understanding that the workforce would be available and the government would make it cheap for a company like Dell or Apple to set up. It’s as difficult to replace workers in these settings, whereas in the knowledge economy it’s the workers who have the capital stored in their heads that brings value to a company. Now that we have a knowledge-driven economy rather than a manufacturing one, the proximity of workers moving between one company or another is key.
Where can these employees be housed?
We know where the investments are going to want to set up. We also know that there won’t be another major office build completed in the capital until 2016, and this will place huge pressure on the IDA in attracting investments when the very practical question is raised as to where the employees can be housed.
We’re moving very slowly with strategic development plans and turning them into a reality, and we’re also being hamstrung by antiquated thinking around what we might allow be developed in the city. There is a height restriction of 80 to 90 meters, or 22 stories, being applied to the handful of towers that will be allowed go up, such as the replacement for the U2 Tower and The Watchtower at the Point Village that were planned during the boom.
To put that in context, the centrepiece of Canary Wharf – to which our own Docklands is sometimes compared in terms of development potential – is One Canada Square; which rises to 50 stories, or 235 meters. It contains approximately 111,000 square meters of floor space, but has a modest footprint on the ground for it.
High-rises are far more efficient than vast, low-rise urban sprawl
I’m not sure we need a load of 50 story skyscrapers in Dublin, but the antipathy towards even more modest tall buildings is fascinating. Some might argue that a skyline of tall buildings down at the docklands wouldn’t look well, yet we’re arguing that the Poolbeg Towers have become an institution that should stay beyond their service life.
Many cities take pride in their skylines, and modern skyscrapers with unique designs become a hallmark for a city. They’re also far more efficient than vast, low-rise urban sprawl leading to the development of massive car parks posing as roads.
As it is we have a lot of penny-packet efforts to convert a warehouse here or seek permission to put up something serviceable on a piece of idle wasteland there, of which we are not lacking in the docklands. It’s taking too long, and while residents can simply be pushed out to longer commutes in search of affordable living on the suburbs, the FDI giants can just go somewhere else with attractive tax rules.
We can’t afford to lose one single investment because of a lack of office space. If a major player doesn’t come to Ireland, we may well lose a number of the pilot fish that swim around them. The IDA is great at getting business to Ireland, but one feels that perhaps there is less urgency among the other state agencies and councils that are needed to get good quality buildings up quickly. This needs to change.
Aaron McKenna is a businessman on columnist for TheJournal.ie. You can follow him on Twitter here.
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