The Georgian office market has bounced back strongly over the past two years and, given that the prime Dublin 2 Grade A office vacancy rate now stands at an all-time low of 1.25 per cent, many feel this uplift is set to continue.
However, Georgians have a long way to go to recover the highs of 2007 when the Football Association of Ireland's former headquarters at 80 Merrion Square sold to Lochlann Quinn for close to €9 million.
“The Georgian office market is interesting to observe as there is a trend that demonstrates Georgians lag the market in the face of recovery and lead it in terms of a downturn,” says Louise Doherty of Bannon. “The reason being is that they are relatively inefficient due to their cellular nature and have been difficult and costly to maintain and update. This historically made them the office occupier’s solution of last resort.”
Most agents agree that the Georgian office market bottomed out in 2011 when values dropped to between €250 and €300 per sq ft, way off 2007’s peak of €1,500 per sq ft.
"Prime Georgians are now making between €455 and €492 per sq ft depending on location," says Brian Gaffney of Murphy Mulhall. "Prices have risen on average by 20-25 per cent over the past two years."
Adrian Trueick, a director at Knight Frank, says that although current pricing for Georgians shows an "uplift of 100 per cent on trough values, levels are still well below comparable modern buildings and this suggests the potential for prices to push on further".
According to David Bennett of DTZ Sherry FitzGerald, prime Georgian prices "very much depend" on the condition of the property, its remaining period features, the provision of a mews and parking, and the location.
So who is investing in Georgians? “It’s a spread of Irish, UK and US investors,” says Bennett. “We had over €35 million from 12 bidders chasing the purchase of one Georgian this year.”
Trueick believes investment activity in Georgians is dominated by high-net-worth buyers “with particular interest from private UK investors who are benefiting from the strong sterling rate”.
Overseas purchasers who usually have some form of Irish connection are the ones busy buying Georgians, according to James Nugent of Lisney.
“Most of these investors prefer to get Georgians in good condition while Irish purchasers are more willing to take on work and refurbish properties,” he says. “Investors have been looking at dwindling deposit rates and are seeking to get higher returns on their money and as such period buildings have come into focus.”
Recent transactions include 61 Merrion Square, which sold for €2.7 million (€530 per sq ft) and 21 Fitzwilliam Place which sold for €3.1 million (€425 per sq ft). A refurbished building at 8 Fitzwilliam Place was guiding €2 million but is now “sale agreed” for considerably more.
All eyes, however, will be on Edward Haughey’s former Dublin headquarters at 64 Fitzwilliam Square. It recently went on the market with McNally Handy for more than €4 million. The house is fitted out with ornate plasterwork, gold leaf decorations, murals and marble pillars and fireplaces. It is a large at 574sq m (7,255sq ft) and has a double garage to the rear which can take at least four cars. An adjoining Georgian owned by Sir Anthony O’Reilly was sold earlier this year to a Meath-based businessman for €3.2 million.
In recent years the sale of Georgians was dominated by receivership disposals or forced transactions at the behest of banks. But this is changing with agents reporting an increase in the number of privately owned properties for sale. “This movement perhaps signals a welcome normalisation of the market,” says Trueick.
The rental market for Georgians has also significantly improved. "This is mainly due to the continued strengthening of the modern office market, which the Georgian office market traditionally lags behind," says Conor Whelan, a director at agent QRE.
“Prime Georgian rents now stand at over €30 per sq ft and up to €40 per sq ft is achievable for very high quality buildings. Occupiers seeking 4,000-5,000sq ft of office space in Dublin 2 will now consider good quality Georgian offices – mainly due to the critical lack of supply of modern office space – but also because these modern floorplates are commanding rents between €50 to €60 per sq ft. That’s way above Georgians.”
Brian Gaffney puts the rise in prime Georgian rent over the past two years at 25-30 per cent but Trueick believes they have increased from €18 per sq ft to more than €30 per sq ft – that’s up two-thirds.
“Georgian rents are likely to continue to rise whilst the completion of more modern accommodation options for occupiers are 12 to 18 months away,” says Gaffney.
Another reason why Georgians are in demand, according to Marie Hunt of CBRE, is that the break profile for leases in more modern accommodation is shifting from a five-year profile out to 10 years "so Georgian properties can also offer greater flexibility in this regard".
Demand for Georgian office space is coming mainly from professional services firms, accountants, solicitors, media firms and recruitment companies. Even some tech firms are considering the sector as a short- to medium-term let.
Many agents report having sold Georgians recently where the new owner planned to return the building to residential use but most agree it is the exception rather than the rule. This is despite the introduction of the Living City Initiative which aims to incentivise the conversion of Georgian office space back into residential.
“The requirements of residential buyers, including a fully intact rear plot and north-east aspect, limit the number of suitable properties,” says Trueick.
However, there’s no doubting the enduring appeal of Georgian properties for office use. They are popular with many smaller indigenous businesses and suit a multi-let scenario. In addition, their architectural value protects them against depreciation due to changes in architectural tastes, something which new buildings can be susceptible to.