Your Guide to Leasing Offices in Ireland. Your guide to leasing property

Transcription

1 Your Guide to Leasing Offices in Ireland Your guide to leasing property

2 SUMMARY IRELAND Continues to be one of the most favoured global locations for investment. Over 1,000 international companies are operating in Ireland. In 2011, new investment into Ireland increased by 30% and 13,000 new jobs were created by foreign direct investment (FDI) companies. In the first four months of 2012 new and existing companies have announced an investment of over 540m in Ireland creating almost 3,000 jobs. Key attractions for investing in Ireland include: 12.5% corporate tax rate Highly skilled and educated workers Youngest workforce in Europe Globally experienced senior management Attractive Intellectual Property (IP) and holding company regimes 25% Research and Development (R&D) tax credit plus R&D grants Increased cost competitiveness Free movement of goods and services in EU English speaking and member of EU/Eurozone Lowest inflation rate in the EU Ability to connect to the US and Asia in the same day Access to European market and beyond Ireland is gaining increased international recognition for progress made in addressing its economic challenges and stimulating an export-led economic recovery. Source: IDA Ireland

3 Why Ireland? Ireland s strategic location facilitates easy access to the EMEA region. Membership of the EU enables companies investing in Ireland access to an international pool of talent and expertise with relative ease. This provides access to multiple languages and skills, in addition to the highly educated and skilled domestic workforce. Ireland s excellent telecommunications infrastructure includes state-of-the-art optical networks and international connectivity. The world s leading companies choose Ireland - evidence of this is as follows: Ireland becoming the internet capital of Europe 8 of the top 10 ICT companies are in Ireland 9 of the top 10 pharmaceuticals 15 of the top 25 medical companies > 50% of the world s leading financial services firms The 3 T s! Track Record: Microsoft - Facebook - Dell - Boston Scientific - Coca cola - Google - Kellogg - Paypal Tax - very favourable 12.5% corporation tax Talent Ireland has the youngest workforce in Europe - 34% of the population are under the age of 35. Government is focused on R&D - aim to double the number of PhD s by Free movement of labour in EU allows flexible flow of talent into the country. Economic Overview Following three consecutive years of negative economic growth the Irish economy grew by 0.7% in 2011 as measured by Gross Domestic Product (GDP) recorded the first annual growth in the economy since 2007 which is good news. The pace of growth was particularly strong in the first half of 2011 but slowed in the second half as concerns about the Eurozone impacted overall activity. However GDP did increase by 0.7% for the year as a whole and is expected to reach 0.5% this year, which is positive against the difficult economic conditions being faced by our main trading partners. Aside from external demand, key factors supporting the recovery are the 12.5% corporation tax rate, the government s commitment to addressing the public finances and an educated workforce. These factors support the export sector in particular which is driving the gradual recovery in economic output. Source: IDA Ireland

4 Fiscal Stability Q1 2012/ Location Prime Office Prime Industrial High Street Retail Brussels ,800 Dublin ,500 Berlin ,000 Under the EU/IMF Programme, the government must reduce the deficit to 3% of GDP over the coming years and under the new EU Fiscal Compact (which needs to be ratified by a referendum in Ireland) the deficit must Dusseldorf be reduced 278 over an agreed 65 period 2,760 to 0.5% of GDP. Hamburg ,940 The government has implemented a series of austerity budgets which has reduced the Frankfurt deficit to 8.3% 432 at the end 72 of ,120 (excluding effects of recapitalisation of banks) and is targetting 7.5% for Vienna ,080 London 1, ,804 Bond markets and international commentators have reacted well to the progress that is being made in addressing the fiscal agenda which is reflected in the continued level of inward investment. Stockholm ,375 Oslo ,950 Ireland is ranked the No.1 place to do business in Europe (Forbes, 2011) MD World Competitiveness Yearbook 1st for real corporate taxes 1st for business legislation for foreign investors 1st for investment incentives for foreign investors 1st for availability of skilled labour 2nd for immigration laws 3rd for availability of finance skills 4th for labour productivity 5th for Human Development Index (economic, social & educational) Category Ireland's Ranking out of 134 Countires Best Country to do Business 2011* 4 Best Country to do Business Personal Freedom 1 Investor Protection 5 Tax Burden 6 Red Tape 10 Trade Freedom 11 Technology 17 Innovation 22 Aside from external demand, key factors supporting the recovery are the 12.5% corporation tax rate, the government s commitment to addressing the public finances and an educated workforce. These factors support the export sector in particular which is driving the gradual recovery in economic output. Source: IDA Ireland Q1 2012/ Location Prime Office Prime Industrial High Street Retail Brussels ,800 Dublin ,500 Berlin ,000 Dusseldorf ,760 Hamburg ,940 Frankfurt ,120 Vienna ,080 London 1, ,804 Stockholm ,375 Oslo ,950

5 Corporate Tenant Representation

6 Corporate Tenant Representation We provide fully integrated real estate solutions for office occupiers. Our dedicated corporate tenant representation team provides specialist commercial property advice to corporate clients who wish to set up an office in Ireland. How we can help you: Savills Corporate Tenant Representation provides a full spectrum of office occupier services. We engage at an early stage with clients to identify the scope of their requirements, whether that may be looking to expand their business or dispose of current assets. To date we have helped clients expand their business by disposing of their existing interests, while simultaneously sourcing a new property in an efficient manner on favourable terms. Our advanced network in conjunction with our partner Cresa Real Estate in the United States provides the right advice on both a local and international stage. Through Cresa we enable US Multi Nationals a hassle free experience when establishing their company in a new market. The Services We Can Provide are as follows: Full cycle corporate services Executive relocation advice Marketing strategy, methodology and insights into market trends Tenant Advisory Lease negotiation Cash flow and service cost strategy advice Full Project Management Property management Site appraisal, development options and strategy Office design, specifications and management Rent reviews, re-gears and renewals Rating / local tax advice and appeals Our Expertise Our clients benefit from the experience of a successful team. We provide best in class services through our ability to understand our client s requirements and assist them in achieving results. Our clients range from both national to multinational operations and include: State Street Dog Patch SEB Life Ireland Bank of Ireland ESB DELL

7 Leasing Terminology Heads of Lease Terms The principal terms upon which the lease will be drafted are detailed within a single document, entitled Heads of Lease Terms. These terms are negotiated between the landlord s and the tenant s agents and, once agreed, they are forwarded to the parties solicitors to be reflected in the lease document. The Heads of Lease Terms will contain the key financial, occupational and principal legal terms, but they are not normally legally binding to either party. Lease Term Dublin office occupiers most commonly agree leases for 5 to 15 year terms, with options to break the lease no earlier than the fifth year. Some larger occupiers may sign leases of 15 to 25 years, but these have become increasingly rare. Irish law provides the opportunity, under the Landlord and Tenant Act 1980/1994, for a tenant to have the automatic right to renew its tenure once in occupation for more than 5 years but most landlords will request the tenant contract out of this provision for leases of less than 10 years.this is the standard form of lease which an office tenant generally signs and it places the burden of cost for repairs and maintenance upon the occupier by way of a service charge. In addition, the tenant will be liable for the cost of insuring the property. Rent Review The rent will be subject to an upwards/downwards review, normally at every fifth anniversary of the lease commencement date, this clause is now law as previously almost all leases were upwards only. The rent review mechanism should seek to establish the Open Market Rental Value of the demised premises, as if vacant and available to let at the review date, having regard to the incentives available in the market place and adopting an agreed set of assumptions. If the parties are unable to agree the revised rent, there will be a default provision in the lease providing for the rent to be determined by a third party. Break Clauses These clauses can be either Tenant Only, Landlord Only or Mutual break options. A Mutual option gives both the tenant and the landlord the right to break, while with a Tenant Only option, only the tenant has the right to break and vice versa for the Landlord Only option. The mechanism and any conditions which must be adhered to, to operate the break successfully, will be detailed within the lease. The two key conditions will specify the timing of the Break Notice on the other party and the obligation for the tenant to provide vacant possession on the break date. Alienation Assignment and subletting The ability of a tenant to assign or to sublet the premises, in whole or in part, is a very important element of the lease and should provide occupational flexibility to tenants. The provision of these rights to a tenant is common in the Irish office market but the conditions and mechanism are open to negotiation between the parties. In general, a landlord will be more restrictive with these rights if tenants are seeking to take a shorter term lease, or those with perceived weaker financial covenants. Dilapidations / reinstatement obligations The obligation on a tenant to reinstate the premises forms an important element of the Full Repairing and Insuring Lease. It is normal for the occupier to return the premises to the landlord in a state agreed at the commencement of the lease. The tenant can either undertake the reinstatement work itself, or seek to agree the cost of the work required (known as Dilapidations ) with the landlord and pay the landlord the appropriate sum as compensation.

8 Step by Step Leasing Procedures Each tenants requirement is unique but the steps involved in securing office premises are typically as follows Step 1 The Brief / Search Criteria Savills will conduct a detailed discussion with the client to determine the core elements of their occupational requirement, which will include; Size of office space required immediately through a space audit Anticipated growth of the business and its timing Location transport links, local amenities and neighbouring occupiers Image, style and quality of building Budget Competitor and affiliate trends Facilities and specification required (e.g. IT, telecoms, air conditioning and occupational density) Corporate Social Responsibility and environmental considerations Specific requirements Step 2 Reporting and Initial Selection Once the occupational requirement has been defined, Savills will provide information on a range of potential options for consideration sourced from: Current availability internal and external databases Off market opportunities knowledge of corporate activity and future occupier intentions Lease events tenant breaks and expiries Second hand returns from occupiers Development pipeline planned future new buildings and refurbishments for which a pre-leasing agreement could be available. In consultation with the client, a list of potential property options will be drawn up, together with an indication of the likely achievable leasing terms.

9 Step 3 Inspections Based on the initial selection made by the client, Savills will arrange an itinerary and transport, if required, for accompanied site inspections. Simultaneously, it is advisable for the client to employ the services of a fit- out contractor or project manager to provide initial test fit plans and technical input. Step 4 Short Listing Having inspected the selected options, a short list of favoured properties will be drawn up and these can be assessed by modelling the financial terms on offer for the lifecycle of the proposed lease. Step 5 The Negotiation The key financial, occupational and legal terms are then negotiated between Savills and the landlord s agent. During this process Savills will be acting on the client s behalf; providing impartial advice and information on offers received and any proposals or responses made on their behalf. The offers, proposals and responses can be reflected in the financial model to arrive at like for like comparison of the bottom line terms on offer for each short-listed property. Step 8 Legal Due Diligence Solicitors tend to take a number of weeks to agree the terms of the new lease, following which engrossed documents will be sent to the occupier and then the landlord for signature. Once signed and exchanged the lease forms a binding contract and the occupier will generally receive possession of the demise on the day of exchange. Step 9 Fit Out New Offices It is important to ensure fit-out contractors, and/or project managers, are involved from an early stage in the proposed fit out of the demise. The consultants/contractors should provide drawings, plans and a Scope of Work, in order to obtain the landlord s approval and therefore be in a position to start on site at the earliest opportunity. Step 10 Taking Occupation / Reinstatement of Previous Premises When the fit-out works have been completed, the premises should be ready for occupation. If the tenant is relocating from other premises, the previous premises may need to be reinstated in line with the previous lease provisions. Step 6 Head of Lease Terms The agreed principal terms negotiated between the landlord and the occupier form the Heads of Lease Terms, a document that is forwarded to the parties solicitors to form the basis of a lease for the premises (see leasing terminology). Step 7 Building Survey A full structural and mechanical / electrical survey should be carried out and can be undertaken by Savills. The heads of terms will specify this as a condition of the agreement.

10 Associated Costs Occupational Costs Rent Rent is generally paid quarterly in advance on the UK quarter days (25th March, 24th June, 29th September & 25th December). Business Rates A tax on commercial property, which is assessed every 7 years and thereafter increased annually in line with the local authorities cost multiplier. Service Charge In a multi-tenanted building the service charge is collected to pay for the management, maintenance and repair of the building with an additional charge for an apportionment of the insurance premium paid by the landlord. Value Added Tax (VAT) A tax on consumers is charged at 23% of the sale price of services and selected items. Whether VAT is payable on rent depends upon whether the Landlord has chosen to charge VAT but VAT will be payable on the Service Charge Dilapidations As mentioned in Leasing Terminology, dilapidation costs are the cost of reinstating the premises to an agreed state at the end of the lease. Legal Fee Each side bears their own legal costs Rent Deposit If required by the landlord, a tenant will need to provide security in the form of a deposit of an agreed amount, which will typically be held in an Escrow Account until either the end of the lease, or can be released when the tenant has passed specified financial covenant tests, or upon assignment of the lease. Transactional Costs Fit out Costs Payment of a professional team and contractor for undertaking the fit-out works and furnishing the offices. Please refer to Project Management and Fit-Out Works for further details. Stamp Duty This UK tax is principally aimed at property purchases but if a new leasehold interest is entered into the tenant is liable for a charge of 1% of the average annual rent. Agency Fee Unless otherwise agreed, Savills agency fee (exclusive of VAT) is typically 10% of the annual rent, disregarding any incentives provided by the landlord. The fee is only paid once and will typically be paid by the tenant on exchange of legally binding contracts. The fee structure can be varied to reflect clients preferences (e.g. fixed or incentivised basis).

11 Rent Office rents are quoted in Euros per Square Foot and per Square Metre per Annum. This rent is exclusive of Business Rates, Service Charge, Insurance and any other charges or taxes, such as VAT, unless otherwise stated. Serviced Offices For requirements of less than 150 sq m and where greater flexibility is required (ie 6 18 months) Serviced Offices offer a short term solution or an interim measure. Whilst more expensive than a conventional lease, they provide a fully fitted and serviced option and the simple nature of the contract enables almost immediate possession. Incentives / Rent Free Periods A rent free period is the principal inducement offered by landlords to tenants and the amount available will depend upon various factors, such as the size of the unit, financial covenant strength of the tenant and the prevailing market conditions. It is important to note that during the rent free period, the tenant will still be required to pay any other outgoings, charges or taxes applicable. Should the tenancy include a tenant only option to break the tenancy, a landlord will frequently structure an additional rent free period over this break option to incentivise the tenant to remain in occupation. All inclusive serviced office rents are quoted in Euro per work station per month. Office grade definition Office buildings are generally categorised into one of three classes which may be defined as follows: grade A grade B grade C Modern specification building with high quality finishes, incorporating air conditioning, suspended ceilings and raised floors Medium quality building with dated facilities Low specification or older building, with limited facilities, and poor quality finishes, usually located in non-core location. Area definitions Net internal area This is best described as the usable office floorspace within a demise; for example, excluding pillars, WC s and the common areas within a multi let building (the exact definition of which is set out in the SCSI Measuring Practice Guidance Notes 2012).

12 Occupier s Do s and Don ts Do s Don ts Factor in anticipated head count growth and work place changes to your business during the lease terms Involve a team of specialists (whether internal or external consultants) to consider IT, fit-out and other technical elements of your requirement from the outset Consult and brief your staff about the move to ease the transition process Prepare evidence of the lessee / guarantor s financial covenant strength and discuss the implications of its relative strength with your leasing advisor at an early stage Prepare the internal decision making procedure and structure needed to ensure the key decision makers are aware of the process and are ready to participate when necessary. Look only at the Rent Per Sq Ft; it is better to compare buildings on their overall costs Leave the relocation to the last minute, as it will certainly limit your options and may cost your company financially Be afraid of asking advice and assistance. Savills is here to help your company throughout the whole process Base the size of your requirement on the amount of space you currently occupy; base it on your future needs Perceive the relocation only in the short-term but in relation to your long term business plan

13 Dublin Market Focus Dublin 2 At the heart of the city is the central business district of St.Stephens Green to the Grand Canal, traditionally the home to mainly Georgian Dublin, but now providing a diverse range and size of office accommodation. There is sustained demand for Grade A space from the services sector, attracted by the quality of hotels, restaurants and retail. The existing stock of accommodation tends to be smaller floorplates of typically 5-10,000 sq ft. The development of new Grade A office buildings with typical floor plates of 15,000 sq ft + has been concentrated along the boundaries of the CBD along the canal. Docklands North Docks The north docks are home to the cities major financial service providers. This location was originally set up as a tax designated area to provide an efficient clustering for the financial services sector. The accommodation available is all modern varying from, Grade B to Grade A accommodation in floor plates from 2,000 sqft suites to 20,000 sqft. South Docks The south docks have evolved dramatically in the last few years and are now home to two main sectors. The majority of the largest legal practices have now moved into this area. In addition it is now the focal point for the IT sector. This area is seen as the biggest clustering of the world s largest IT Companies. The accommodation is principally large floor plates of 15,000 sqft + in Grade A accommodation. Suburban The Suburban office market is located principally around Dublin s principal ring motorway on the outskirts of the city. It is home to many large occupiers who don t require a city centre presence. Accommodation can vary widely but large floor plate Grade A space is readily available. North Docks dublin 2 south Docks Suburban

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15 5 M2 M1 M50 3 M3 4 M4 6 7 CITY CENTRE 1 8 N7 15 N81 DUBLIN SUBURBAN OFFICES 9 M EAST POINT 2. AIRSIDE BUSINESS PARK 3. NORTHERN CROSS 4. NORTHWOOD 5. BLANCHARDSTOWN CORPORATE PARK 6. LIFFEY VALLEY 7. PARK WEST 8. CITY WEST BUSINESS PARK 9. DUNDRUM 10. SANDYFORD 11. SOUTH COUNTRY BUSINESS PARK 12. THE PARK 13. CHERRYWOOD 14. BLACKROCK 15. BEECHWOOD

16 LIMERICK City Centre Two of the main office locations in the City Centre would be Henry Street and O Connell Street. There is existing office stock available from 1,000 sq ft to approximately 17,000 sq ft with a mix of modern office space on Henry Street with more period style buildings on O Connell Street. There is a lack of new Grade A office buildings with floor plates of 15,000 sq ft +. Surrounding occupiers include ACC bank, Certus, Ulster Bank, AXA Insurance, Grant Thornton, IBRC and Limerick Chamber of Commerce. Plassey Plassey is an area of County Limerick on the River Shannon, near Castletroy and Limerick. The (IDA) National Technology Park in Plassey consists of a 600 acre high quality science and technology park located on the banks of the River Shannon. The world renowned University of Limerick is part of the National Technology Park. Office units are available from approximately 1000 sq ft to 16,000 sq ft. Raheen Raheen is a growing suburban area located immediately southwest of Limerick City. Raheen Business Park is the home of many international and multi-national companies which include Analog Devices and Dell. There are various sized office units available, suitable for large or small companies with on-site parking. Units range from 1,000 sq ft to approximately 12,000 sq ft, however some units are shell & core while the remainder of available space may need upgrading. There is a large industrial/ manufacturing space available with interconnecting office units extending to a total floor area of approximately 336,326 sq ft. Surrounding occupiers include Ulster Bank, ACC Bank and Holmes O Malley Sexton Solicitors. Surrounding occupiers include Ulster Bank, ACC Bank and Holmes O Malley Sexton Solicitors. City Centre Offices Retail industrial

17 Galway West Galway The IDA park at Dangan and GalwayWest Office and Retail Park are the two major centres of activity on the west side of the city. Both provide good quality office space in a pleasant environment. While traditionally this would be the less active side of the city, the construction of new housing and the difficulty of cross city commuting have combined to increase the attraction of the West side. City Centre Most city centre space is clustered close to Eyre Square and traditionally the demand for this location has been mainly from local financial services companies and state users. East Galway Activity is centred on the older Mervue IDA Park and the Ballybrit and Parkmore Parks. Parkmore has some of the best buildings in Galway and has proved popular with financial and gaming software companies. There are sites for further development available. Oranmore While not a major centre at present, A new Science & Technology Park in Oranmore with approval for a fully integrated biopharmaceutical facility is currently being developed by IDA Ireland.. Parkmore Galway Business Park Galway West Retail City Centre Bio Pharma Park Offices Retail industrial

18 Cork Cork City Centre Cork central business district traditionally extended from Grand Parade to the end of the South Mall. However, in more recent years areas such as Lapps Quay, Albert Quay and Penrose Quay have become increasingly popular with modern office buildings, hotels and restaurants. The existing availability of office accommodation on the South Mall (CBD) is mainly older style Georgian buildings. The development of new modern office buildings occurred along Lapps Quay with typical floor plates of approximately 10,000 sq ft +. The availability of space along Lapps Quay is decreasing as multinational companies are occupying the larger/modern space. A modern building on Georges Quay provides Grade A space from 4, ,000 sq ft. Mahon Mahon is an area to the south east of Cork City. Over the last number of years modern high specification offices have been developed along the main spine roads. The general area has major employers such as the Central Statistics Office, Project Management, Webprint and RCI. A major office development City Gate and Citygate Park can offer accommodation from 5,000 sq ft up to 200,000 sq ft. Little Island (Eastgate) Eastgate is ideally located 1.5km east of the Jack Lynch Tunnel and less than 10 minutes from the city centre and from the airport. This is a superbly designed new office/business accommodation development with units available from 2,500 sq ft to approximately 70,000 sq ft. Tenants in Eastgate include Eli Lilly, Pepsi, Laya Healthcare, Gilead Tyco and Bank of Ireland. Airport Business Park Located just two minutes from Cork International Airport, Cork Airport Business Park represents an outstanding opportunity for businesses to gain a foothold close to expanding European markets. The park offers state of the art accommodation from 2,000 sq ft up to 20,000 sq ft in a modern business park environment immediately adjacent to Cork International Airport. Blackpool Business Park Blackpool Office Park has been created to be part of a vibrant community, which includes a wide range of shops, restaurants, pubs and amenities. Generous third generation offices with the ultimate in efficiency, flexibility, style and service with space available from approximately 3,000 sq ft to approximately 30,000 sq ft.

19 Blackpool Business Park Cork City Centre Little Island, Eastgate Mahon Cork Airport Business Park Offices Retail industrial

20 Contact Dublin Office: Roland O' Connell Director, Offices Savills Ireland +353 (0) savills.ie Darragh Cronin Associate Savills Ireland +353 (0) Cork Office: Niall Guerin Associate Savills Ireland +353 (0)