The International Financial Services Centre (IFSC), established in 1987, was the brainchild of Dermot Desmond of NCB Stockbrokers and enthusiastically supported by the then taoiseach Charles Haughey.
While the scheme proved to be a hit with the financial services industry, it was also attractive from a property occupier's perspective, offering as it did a double rent allowance write-off against tax and an exemption from local authority rates for the first 10 years of the term. The IFSC buildings often achieved rents that were considerably higher than the traditional central business districts due to a combination of building quality, transport and tax incentives.
The IFSC represented Dublin’s first step towards the provision of a true financial district, with large high-rise (by Dublin standards) office buildings with large floor plates, secure underground parking and 24-hour security.
And it worked. Numerous high-profile occupiers, both domestic and international, were attracted to Dublin’s newly-created financial hub.
While there was some disquiet at the time from certain quarters, with suggestions that certain companies were utilising the benefits accorded by the IFSC without maintaining an actual physical presence there, the concept and its execution can only be viewed as a success.
Change is on the way
Having said that, I believe that changes are afoot that will see the IFSC having to move away from its historical reliance on the financial services sector. It’s time now for the area’s landlords to consider how they can attract the technology and ecommerce sectors and how, more generally, they can broaden their buildings’ appeal.
A good example of the shift in the IFSC's occupier base is UniCredit. Having chosen along with a number of other European lenders to establish Irish subsidiaries in the 1990s, the Italian bank recently announced its decision to close its profitable IFSC unit.
Reporting on the matter on May 12th, The Irish Times highlighted how UniCredit’s Irish subsidiary had managed to deliver a €32.2 million dividend to its parent as recently as May 2020.
The Italian bank is not the only foreign-owned financial institution to make such an announcement this year, with others including Goldman Sachs and Commerzbank, to name but two, returning their licences to the Central Bank of Ireland.
Other major announcements have signalled the departures of both Ulster Bank and KBC from the Irish market while Rabobank, Bank of Scotland and Danske Bank have all withdrawn from the retail market since the financial crisis. It is likely that more financial institutions will follow suit by either scaling down their operations or discontinuing their activities in Dublin altogether.
Changes to the way we work
Leaving aside the potential withdrawal of international players from Dublin's financial services sector, there is also the matter of the role the traditional office will have in the operations of those who continue to do business here. One example in Britain is NatWest, which says it expects just 13 per cent of its staff to return to the office full-time. The majority – 55 per cent – will work to some hybrid solution and at least one-third will be at home full-time apart from two days each month when they will be required to be in the office.
Here at home, a contact of mine at one of the large US tech companies recently told me that it was grappling with the issue of many well-qualified and well-paid European workers who over the course of the Covid-19 pandemic have become accustomed to paying rents for lovely apartments in their home cities and working remotely from their Dublin office. Initially the company was reluctant to agree to this arrangement but, having found it difficult to find similarly qualified and experienced replacement staff, they and other leading companies are looking to see how they can integrate and motivate these staff from a distance.
But while the working from home (WFH) model has worked quite well for pure tech and fintech companies during the pandemic, there is certainly a place for the office model now and into the future.
The new order
Further down the Luas red line track from the IFSC, it is interesting to note that the recent large occupiers have come mainly from the tech sector, with Salesforce being the most notable occupier to take space from Ronan Group Real Estate (RGRE) at Spencer Place on North Wall Quay. Conversely, there is currently a number of mid-sized requirements from the financial services sector for accommodation in Dublin 1, 2 and 4, so they are broadening their location options. What appears to be happening is a move to a less-rigid and less-structured location profile. Naturally, availability will dictate some very large lettings, such as for TikTok and Facebook, with the latter now transforming the Dublin 4 embassy belt, which traditionally had been populated with financial institutions and professional services providers.
Back in the city itself, the IFSC has ceded both ground and existing and potential occupiers over recent years to the north and south docklands.
Arguably the most notable of example of this is the finance occupier JP Morgan. The company, which has had a presence in Ireland for nearly 100 years and in the IFSC for most of its existence, expanded its business operations in 2018 by pre-leasing and taking up space in the then newly-completed 12,000sq m (129,167sq ft) 200 Capital Dock on Sir John Rogerson’s Quay.
So what now for the IFSC?
TWM recently leased approximately 10,000sq ft in Custom House Plaza at the IFSC to two technology companies, one in domain registry services and the other an insurance company offering fully digital online bookings and purchases. We are also getting requests from new occupiers to know who their neighbours in the IFSC will be, while others want to share multi-let buildings with similar occupiers. Our landlord clients are happy to consider these requests and also any upgrade works or changes to how the buildings operate, and to move away from the traditional, conservative corporate image that a location dominated by banks engenders.
While the IFSC will continue to serve the financial sector, there are many within that sector who are voting with their feet and moving to other locations in the city and in the suburbs. In our view, the time has come for larger landlords in the IFSC to consider who their future occupiers might be, and whether the buildings they are offering to them are sufficiently attractive.