Offices are available to buy at no more than rental levels

ONE OF THE sharpest falls so far in the value of office buildings in the entire Dublin market has surfaced at Park West Business Park off the Nangor Road and the M50 in Dublin 12.

A three-storey office block sold by Harcourt Developments in 1998 for £4,008,000 (€5,090,160) – but never once occupied in the intervening 14 years – is now back on the market at €850,000. That’s a drop of 83 per cent.

Block 11B – known as Joyce House – was one of a number of stand-alone office buildings completed at Park West in the late 1990s and sold to investors anxious to avail of attractive tax incentives.

To sweeten the deal, Harcourt guaranteed the rent, in some cases for three years.

The availability of 100 per cent capital allowances against all income proved a strong selling point at the time, even though only 25 per cent of the tax breaks could be availed of in the first year and 4 per cent per annum thereafter.

However, the entire tax package was only available to those who managed to let the office blocks to international service companies, such as software enterprises.

The 13 investors who bought Joyce House failed to attract a qualifying tenant over the years and were therefore unable to avail of the tax package. The rent guarantee provided by Harcourt Developments ran out after three years.

One of the agencies originally involved in selling a range of blocks in the scheme said the owners of some of the buildings also failed to rent them to qualifying international service companies and were not able to cash in on the tax incentives.

However, some of the investors managed to rent part or all of the buildings to other companies at competitive rents.

Harcourt Developments did not return calls on Monday or yesterday.

When former taoiseach Bertie Ahern officially opened the park in 2008 he promised that it would become “the nerve centre of the IT industry in Ireland”.

The early success of the park enabled Pat Doherty’s Harcourt Developments to sell many of the office buildings to well heeled investors looking for tax breaks.

In the case of Joyce House, the investors paid in the region of €2,575 per sq m (€ 239 per sq ft) for the 1,976sq m (21,269sq ft) block and 29 surface car-parking spaces.

After failing to make any headway in the letting market over a prolonged boom and bust period, the owners are now hoping to sell the building at a mere €430 per sq m (€40 a sq ft). As a general guide, construction companies have for years been quoting building costs at around €150/€200 per sq ft before site values are taken into account.

Keith O’Neill of BNP Paribas Real Estate, who is handling the sale along with agent Knight Frank, says it is “quite incredible” that companies looking for office accommodation would now be given the opportunity to purchase the building at no more than rental levels.

“There are any number of office tenants in Dublin paying annual rents of €40 per sq ft for buildings of similar size and specification. My message to them is to take a look here before you make any commitments.”

O’Neill says the block is now priced to sell and he expects that it will be of interest to owner-occupiers and companies paying excessive rents who now had an opportunity to opt out of their leases.

Despite the unfortunate record with office buildings sold to investors, Park West claims to be Ireland’s largest multi-purpose business campus with no fewer than 280 companies based there.

Its website shows that it has a large number of multinational tenants including Allianz Worldwide Care, Sungard, Nissan, Openet, Curam Software and Sportingbet. The park includes a circular block of apartments which were sold at the peak of the property market.

O’Neill said it had become a lot more evident in the past two years that companies were not as picky about office blocks as they were in the boom years when they automatically plumped for the most prestigious buildings.

Office parks such as Park West and Eastpoint with relatively low rents and good transport links and staff amenities were now experiencing a resurgence in business. Major occupiers including the likes of Google and Yahoo had expanded in Eastpoint and Allianz had also taken additional space in Park West.