EXCLUSIVE: Blackstone Backs Dublin As Salesforce Set To Open Doors To Spencer Place
Spencer Place sums up the resiliency and nervousness of the Dublin office market right now.
A gleaming modern office complex owned by U.S.-headquartered investment giant Blackstone, exclusively let to global cloud-based software company Salesforce and overlooking Dublin’s increasingly slick North Wall Quay, it manifests the incredible growth of the Irish capital’s commercial real estate sector over the past decade. It highlights both Blackstone and Salesforce's belief in the long-term prospects for the city.
But Salesforce also announced just last week that, having expanded rapidly post-pandemic, it is cutting 10% of its 80,000 global staff and pulling back on office space. While there is no sign Salesforce won't occupy its Spencer Place office in full, the fact that the company is scaling back on staff and square feet shows that the tech-fuelled expansion of Dublin's office market is not a one-way bet.
Salesforce is due to take occupation in March 2023 and Bisnow visited the site for an exclusive look around deep into final fit-out, with staff also being given orientation tours for a first sight of one of Dublin's largest-ever office projects.
And Blackstone Head of European Real Estate James Seppala explained why the firm is a big believer in Dublin's future prospects, and why, at a time when the future of the office is an open question, it thinks the best-quality offices in cities with lots of talented staff will continue to see rents rise. It made a €500M bet that is the case.
“While certain segments of the office sector are more challenged today, the Ronan Group developed an exceptional office property at Spencer Place, and we are seeing occupiers increasingly gravitate to exactly these sorts of exceptional office properties in gateway cities globally," Seppala said.
Salesforce agreed to take sole occupancy of the office element of Spencer Place in 2019 and has signed a 15-year lease for what will be its new 436K SF European headquarters.
Blackstone Real Estate acquired the three-block complex from developer Johnny Ronan’s Ronan Group Real Estate and U.S. fund Fortress Investment Group for over €500M last summer in the biggest single building deal of the year.
But Salesforce has not been immune to the economic challenges facing the tech sector and in January 2023 announced that it would lay off about 10% of its employees globally and close some offices as a part of a restructuring plan.
The company has about 80,000 employees worldwide and said in a regulatory filing that it aims to complete the workforce restructuring by the end of 2024, with property disposals concluded by the end of 2026.
However, while some firms like Meta are looking to sublease some newly leased space in Dublin, Salesforce — which confirmed in December that it would sublease part of a floor in its tower in the City of London — has not issued any instruction at this point to secure an alternative occupier for any part of the Dublin complex, Reuters reported.
As it stands it will take full occupancy of the space. It currently employs about 1,400 people in Dublin, and the new building could ultimately house more than 3,000 staff, making Dublin its second-largest global location behind only the San Francisco HQ.
Blackstone Confident In Dublin
For its part, Blackstone — which acquired Spencer Place through its Blackstone Real Estate’s Core+ perpetual capital vehicles in August 2022 — remains confident about the prospects for not only Spencer Place but the wider commercial real estate market in Dublin.
“Despite the challenging macroeconomic backdrop, we are seeing market rents for highly amenitised, well-located office properties in tier 1 markets continue to increase, driven by sustained occupier demand and the extremely limited supply of such premises — premises that check every box occupiers today increasingly aspire to check," Seppala said.
So what is the office actually like?
The first thing to note is that the interior has been designed around a natural feel, predominantly open plan, in small banks of desks with internal meeting rooms and pods, breakout areas and a colour palate of natural colours that softly demarcate areas. The communal nature of the space and the high-spec finishes and facilities are aimed at attracting people back to the office.
That can be seen not just in the workspaces but also in details such as the easy access to cycle parking from the main road and the extensive changing facilities, plus the hospitality zones for staff and their families on the building's upper floors, which afford views across the river and city.
Greenery and foliage were being brought in as Bisnow toured the site and once open, planting and nature will be up close and personal everywhere.
The campus consists of five grade-A buildings: three office buildings, all leased to Salesforce, a smaller red brick building earmarked for meetings and events, and one 204-key four-star hotel, which is leased to Dalata on a 35-year lease and is open already.
The main building faces the water and is eight storeys high, above a triple basement, and has direct access to Spencer Dock Station on the LUAS light rail network, while an increasingly dense residential neighbourhood is emerging around it.
The building was designed by architect Henry J Lyons and Salesforce has invested significantly into its fit-out. Spencer Place aims to be one of the most sustainable commercial buildings in Europe, in line with Blackstone’s stated ambition to help create long-term value for investors through resilient and sustainable assets.
Spencer Place And Sustainability
Some of the sustainable features include 100% renewable energy sourced from on-site solar panels, extensive cycle spaces in the basement (at a ratio of 1 per 6 employees), a green roof that will capture water for alternative uses and upper floors that will be open to nonprofit organisations and local education groups on evenings and weekends.
On the ground floor a large lobby feeds off into presentation areas — the company described it as an immersive video lobby experience — and acts as a connecting space for the campus, while natural finishes and references to nature are abundant throughout.
“Spencer Place has achieved a LEED Platinum rating, the highest possible LEED certification, as well as WiredScore Platinum," Seppala said. "Less than 5% of Dublin’s office stock is certified LEED Platinum today, and the property is only the fourth building in Europe, and the first in Ireland, to achieve a WiredScore Platinum rating.”
For its part, Blackstone has invested significantly in Dublin and currently manages an office portfolio consisting of approximately 1.6M SF, including Spencer Place.
And Blackstone maintained that occupier demand for the “right office properties in the right locations” is behind its ongoing confidence in the city. The investor cited studies such as those from CBRE that pointed to offices with strong ESG credentials commanding a 6% rental premium, and JLL, which reported that nearly three-quarters of CRE executives are likely to pay a premium for green credentials.
"Blackstone takes a thematic approach to investing — one of our high-conviction themes is highly amenitised and newly built or renovated office assets, well located in gateway innovation cities throughout Europe, cities with strong demographic trends that continue to attract young and talented people, and where employers gravitate,” Seppala said.
And despite the wobble in the tech world, the investor pointed to sectors such as the large pharmaceutical companies actively seeking highly amenitised, Class-A office product in select submarkets, even if tech companies are reconsidering their long-term space requirements.
“Dublin has been one of the EU’s fastest-growing capital cities over the past decade," Seppala added. "As the only English-speaking capital city in the European Union today, we believe it will remain highly attractive to corporate occupiers, including tech companies, professional and financial services firms, and pharmaceutical companies.”