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Buzz Continues In Dublin's Coworking Scene

Despite the strength of the Dublin office market and ongoing demand from tech, financial services and professional firms, flexible working providers are snapping up an increasing share of prime space in some of the best locations in the city.

Flexible space operators accounted for around 16% of office take-up in the first half of this year, double the 8% recorded in 2017, according to research from Savills. With total take-up at 1.68M SF between January and June, this equates to around 269K SF taken by operators like WeWork, Iconic Offices, Regus and Glandore.

That growth has caused the prices charged by operators to fall. Is that a sign of oversupply? Perhaps, but in the medium term those in the market feel that the flexible office sector is set fair for sustainable growth.

The kitchen at WeWork's Iveagh Court location on Harcourt Road in Dublin 2

Figures from Instant Group reveal that Dublin had 113 locations offering flexible workspace in September, a jump of 29% in 12 months. The company noted that the market has a diverse mix of space types, with 79 serviced, 21 hybrid (a mix of serviced offices and coworking space), 11 exclusively coworking and two classed as ‘other’.

Instant Group Head of Marketing John Williams said despite widespread use of ‘coworking’ to describe the sector, the reality is somewhat different. “The coworking term has come about because it is so fashionable. But coworking in its truest sense is when you’re sitting next to someone you don’t know from a different company and you’re all startups or one man bands. The reality is the coworking model is very hard to make pay."

Williams said increased competition in the market has driven prices down and should continue to do so. At present, he said, the average workstation rate per month in Dublin is €438. Achieved rates have fallen by €80 per person per month over the last three years as operators offer discounted periods and rates to maintain occupancy levels, he said.

“Everyone — WeWork included — is living off the dream of coworking when in actual fact they’re providing serviced offices.”

HWBC Director Paul Scannell said the flexible space operators offer a stop-gap to companies in growth mode, regardless of whether they’re startups or already employ thousands of people. “Salesforce, Google, Amazon and Microsoft are all expanding still so taking short term space suits them,” Scannell said. “If the market turns they can hand the space back.”

Artist's impression of the Central Plaza scheme on Dame Street

WeWork officially opened its first location in Dublin at Iveagh Court on Harcourt Road in June. Spread over five floors, the building has capacity for 1,170 people. The company has also taken significant space at several other high profile buildings in the capital, including Hines and Peterson Group’s Central Plaza on Dame Street, Ballymore’s Number 2 Dublin Landings and around 50K SF at Irish Life’s 1GQ. 

In July, Green Reit announced it had let all 50K SF of its newly developed 5 Harcourt Road to WeWork on a 20-year lease at an annual rent of €3M.

The workspace provider is also rumoured to have agreed to take the lease on Marlet’s Charlemont Exchange, which in turn will be sublet to Amazon. The online retailer is also understood to have pre-let 200K SF at McGarrell Reilly’s Charlemont Square development.

WeWork’s rapid growth, big debts and enormous rent obligations do not appear to be an issue for landlords like Green Reit, Hines and Ballymore.

The Dublin Landings scheme

The value from an investor point of view should also become apparent through the sale of No 2 Dublin Landings. That building was put on the market in May for €98.8M or an initial yield of 4.5%.  No deal has yet been announced, but a South Korean investor is understood to have been the successful bidder.

No 1 Dublin Landings — let to the National Treasury Management Agency — was bought by German investor Triuva last year for €164M, representing a 3.95% yield.

“People wonder if there is a discount for letting to these kinds of operators,” HWBC Managing Director Tony Waters said. “Maybe Dublin Landings is proof there is. You might say there’s an inherent discount in letting to them due to investors being a little more cautious on the covenant side.”

Scannell and Waters believe the likes of WeWork are now a very definite part of the occupier landscape and will continue to be. “But they’re also going to form part of the landscape for the investment community,” Waters said. “I think we’re going to see more trades of this sort of asset from now on to more traditional, longer term investors.”

As regards WeWork’s own plans for further growth, the company said it is always looking for new locations but has nothing to share on that front right now. Once all five of the locations announced to date are open, it said it will have 4,800 members in Dublin.

Regus reception space in Dublin

WeWork may be bringing buzz to the market, but flexible working primarily in the form of serviced offices has been around for quite some time. Regus, for example, first opened in Ireland in 1998 and now has nine centres in Dublin, with a 10th to open in Blanchardstown in November. The company has two further locations in Belfast and one each in Cork and Limerick.

It has over 3,500 workstations in Ireland and 4,000 customers here. The company said it has “continued plans for growth and new centre openings in the works”. 

Glandore's Fitzwilliam Court flexible space offering

Operating in Dublin since 2001, Irish family-run business Glandore has six flexible workspace and coworking buildings in Dublin, as well as two locations in Belfast with 800 workstations. The company is opening its first building in Cork with a further 350 workstations this November.

“We do have further expansion plans and we are always on the lookout for new and suitable opportunities to expand our offering not only in Dublin, but also regionally across Ireland,” Glandore Marketing Manager Jeri Mahon said. 

Glandore's claims to fame include being the first home and EMEA headquarters in Ireland for companies like Facebook, Twitter, Dropbox and Autodesk.

Iconic Offices' The Brickhouse at Clanwilliam Court in Dublin 2

Iconic Offices, meanwhile, has 13 locations in Dublin 2, as well as two buildings due to open in the first six months of 2019. According to Iconic Chief Executive and founder Joe McGinley, the company currently offers 2,000 workstations across its portfolio.

In the first quarter of 2019, it will add a 70K SF building on Thomas Street in Dublin 8 that will have capacity for up to 1,000 people. “That’ll be our biggest location by a long shot,” McGinley said.

That property includes a 35K SF Victorian building at the front interconnecting to a 35K SF brick and beam warehouse to the rear. “It’s more akin to what you’d see in the likes of Shoreditch,” McGinley said.

McGinley said he welcomes the arrival of WeWork to the Dublin scene. “WeWork gives more diversity to the market. The quantum of space they’re taking also means that it’s going to be a far larger market once they get all that space filled. They’ll introduce a lot of people into the flexible workplace market in Dublin who otherwise wouldn’t be in it. While it does bring continued competition, it’s going to be a far larger sector, which we will benefit from in the medium term."

Other new players are also coming to Dublin. Us&Co will open its first Dublin base on School House Lane in Dublin 2 this month. And German coworking provider Rent24 said last month that it plans to enter the Irish market in 2019 and open five locations here over the next two years.

Instant's Williams expects to see continued growth in the market. "Since the Brexit vote, we’ve seen demand for space in Dublin increase by 20%. It has stayed at those levels of high demand for a long time. I think supply has caught up with demand a little bit but if you look at wider term trends of take-up of this type of space, it’s only going to keep growing."