10.13% return on blue-chip Citywest block

INVESTMENT TERMS in the Dublin office market are becoming more attractive by the week to catch the attention of Irish and overseas buyers looking for top-grade office blocks with strong covenants and long term rental income.

A high-quality office building let to an international company at Citywest Business Campus in Dublin 24 and going on the market today will give investors a net initial yield of 10.13 per cent – probably the highest return available for this category of investment in over a decade.

Michele Jackson of DTZ Sherry FitzGerald is quoting a guide price of €15.5 million for the two-storey M-shaped block which is let to SAP Ireland, part of the German software giant, on a 25-year lease from 2001 at an annual rent of €1.64 million.

The company has steadily expanded on the business campus and now occupies 6,968sq m (75,000sq ft) of office accommodation and 230 car-parking spaces on a lease which has a break option in 2021.

The lease provides for five yearly upwards-only reviews but with the rent currently standing at €204 per sq m (€19 per sq ft) and €850 per car-parking space, it is only marginally above the going rate for the park.

SAP is the largest supplier of business software in Europe and the third largest in the world. It had overall profits of over €3.4 billion in 2011.

The company employs 1,200 staff at its three office locations in Ireland and announced earlier this year that it would be investing €110 million in two IDA-backed projects in Dublin and Galway which would create a further 250 jobs at Citywest and 100 in the cloud computing and support centre in Galway.

Jackson said investors were currently gravitating towards single let buildings where the covenant was “unquestionable”.

She said SAP AG was the most desirable tenant covenant you could have on a lease and its commitment to the building and location was an endorsement of the strength of the investment.

The SAP building is owned by developers Davy Hickey Properties which has attracted around 120 companies from nine countries to Citywest over the past 15 years including AC Nielsen, Adobe, Colgate Palmolive, Esat/BT, Pfizer, Sony and Unilever.

Citywest is located along the N7/Naas Road, just two miles from the M50 and a 30-minute drive from both the city and Dublin Airport.

The Luas was recently extended to Citywest and now has three stops on the business campus. Citywest also has its own shopping centre anchored by Dunnes Stores.