Back in 2011, Brittany-born Kevin Loaec decided to fulfil his dream of starting his own business. He could have done it in France, but found the start-up environment there a bit cumbersome. So he looked a little further afield to Dublin, attracted by the reasonable cost of living, lower taxes and the ease of setting up a new business.
Five years on, his business, Chainsmiths, which offers consulting services in crypto-currencies and block-chain, is going from strength to strength. His admiration for Dublin however, has begun to wane.
“If I had to start a technology company today, that would not necessarily need to be in Dublin, I probably wouldn’t do it in Dublin,” he says.
The reason? The city is simply getting too expensive.
“It’s completely a victim of its success,” says Loaec, of the much-hyped Silicon Docks.
Indeed as a recent survey from Mercer showed, Dublin is now the 47th most expensive city in the world for expats to live and work in – behind London, San Francisco, and Paris – but ahead of other start-up hubs like Berlin (100), Barcelona (110) and Lisbon (134).
"Dublin is getting expensive," agrees Niamh Bushnell, Dublin's Commissioner for Startups, but she adds that, "it's still not as expensive as London for example".
However it is coming to a point where it is now on the radar of tech companies. Indeed Dublin estate agent Owen Reilly now gives a bi-monthly induction at one such tech company, offering advice on the Dublin rental market.
For many, living close to where they might work, in Dublin’s docklands, is the goal. “Certainly when they first arrive they want to be within a 15 minute walk from work,” Reilly notes. However, with rents up by about 25-30 per cent since 2010, it’s not easily achieved. Reilly recently agreed rent on a one-bed, with no parking, at Forbes Quay for €1,600 a month, while he says you could pay up to €1,200 for an en-suite bedroom in a flat-share in the area.
“A lot of people are paying a huge amount of their salary on rent,” he says. And it’s not just the docklands, where the hub of tech, legal and financial services firms have set rents soaring. Rents are soaring right across the capital.
This can make it difficult for start-ups to find accommodation for themselves – or for people they want to hire.
Back in February, for example, Loaec’s company hired an intern from the UK – but they ended up paying a hefty €800 a month in rent.
Reilly agrees that it can be difficult – or very expensive – to find short-term accommodation. “Maybe the Irish market needs to start catering for that a little better,” he says.
And it’s not just residential rents that are a problem. Finding office space is also a challenge.
“When you are mid-sized, trying to hire one or two people to scale a bit, it’s pretty difficult,” says Loaec, noting that you can find a huge open-plan space, albeit an expensive one. But it’s the mid-tier companies that struggle.
An option is to rent five or six desks in a hub. However, prices can be high when compared with European rivals. Take Berlin’s Rainmaking Loft, where a start-up can rent a table for four people for just €750 a month, or the city’s Mobilesuite where someone can avail of a daily pass for as little as €9. Or how about Lisbon, where a desk in a co-working hub can be had for as little as €80 a month.
Bushnell agrees that there have been issues around the under supply of suitable office space, and the inflexibility of letting contracts. “They (letting agents) might look for financials that go back many years, and start-ups wouldn’t have financial paper trails, or a term might be that you can’t sub-let to other companies,” she says, noting that once companies get beyond five employees, there is “a huge amount of competition for larger spaces”.
“If you don’t have investment, or you don’t have enough cash in the bank account, you can’t get your office,” says Loaec. While Chainsmiths is not looking for funding at the moment, if it did and it found it, this can also pose problems.
“When you have funding it’s really hard to justify to your investor that you’re spending it on your rent,” says Loaec, “the investment is there to grow the company”.
It’s an issue that larger start-ups of the likes of Intercom have alluded to in the past; the preference for long-term leases - typically 10, 15 or 25 years
– which are not suitable for fast-growing companies – as well as the lack of availability of space in prime city centre sites.
For now Loaec is happy to stay in Dublin. “Right now it makes sense as it’s where we have our contacts and for our industry it’s good,” he says. But it may change.
“I’m seriously considering other places as well,” he says, adding that it may make business sense to keep an office in Dublin, while he will be based elsewhere.
"If prices continue to go up, I could go live in another country, and fly into Dublin. I'm looking at Spain, Portugal, Greece, " he says, pointing to the much cheaper cost of living in these countries.
In the meantime, Dublin’s already over-stretched rental and commercial property market may be stretched even further if the much-touted flood of financial and tech companies shift across the Irish Sea post-Brexit.