Are spiralling Dublin rents choking its economic growth?
Even generous relocation packages fail to compensate executives working in capital
Rents continue to hit highs and may average 5-6 per cent in Dublin over the next few years. That would bring the average rent in the capital up to more than €2,000. Photograph: Bryan O’Brien
When a French executive was relocating to Dublin earlier this year with a handsome allowance of €6,000 a month, he opted to set up home in a rental property in Ballsbridge’s Raglan Road. But, just as he was about to sign the lease, he got news – he had been gazumped. The property was going to someone else who had offered €7,500 a month.
It may sound a first world problem, but challenges in finding a place to rent – even for well-remunerated execs – are indicative of the wider problem which threatens to choke Dublin’s growth. And at a time when Brexit may present opportunities for the State, problems in the rental market threaten to strangle this potential.
Rents continue to hit new highs and the latest studies suggest annual growth will average 5-6 per cent in Dublin over the next few years. That would bring the average rent on a property in the capital up to more than €2,000. The pressure is building.
Lauren Cullen, a senior human resources professional with the customer messaging provider Intercom, which is busy hiring expanding its Dublin office, says the issue is starting to get problematic.
“There is no doubt this is a real crisis and its long-term impact remains to be seen,” she says. The company helps new recruits in a number of ways, including giving them temporary accommodation in an apartment or Airbnb for a few weeks, as well as hiring a relocation company to help employees find a more permanent home. But even this approach is starting to flounder.
“The challenge here is that even the temporary spaces are hard to get these days,” she says.
David Coyle, recruitment manager with IT recruiter Methodius agrees, arguing that rents are “by far the major problem facing employers and recruiters”.
“Rental costs are suffocating Dublin tech growth,” he says.
It’s something that Mark O’Donnell, a partner with recruitment group Odgers Berndtson, says has “definitely ramped up in the last 15 months and it has become a real concern”, adding that larger companies are now having to ask questions about growing their footprint in Ireland because of infrastructure issues.
Senior executives have always had relocation packages. According to O’Donnell, this can include rent and school fees for the duration of their stay here.
What’s significant now, however, is that employers are also offering incentives for junior staff. One multinational in north Dublin offers a package of €1,250 plus two weeks in a B&B on arrival for customer service specialists earning about €22,000, while Teletech offers seven nights’ hotel accommodation for its customer service roles.
And it’s not just those new to Ireland who are getting support; software group Intercom supports Irish people moving back from the US and other parts of Europe, and is even open to offering support to people moving to Dublin from other parts of the State.
Similarly, professional services firm EY is giving new graduates from around the State who are moving to Dublin an advance on their salary of up to €2,000, which they can put towards a deposit on a property.
Rental inflation is also starting to translate into wage inflation.
Coyle gives the example of a software architect in Lisbon considering a move to Dublin. While he might be attracted by a job on offer here, if his rent in Dublin is €2,800, he’ll need an extra €7,500 in pretax income to pay for it.
“So he’ll say to the employer: ‘you’ll have to come up with the difference’.”
So far, Coyle says, employers are tending to pay more to make up for higher rents. Over the past 18 months or so, he has seen salaries “creep up” by about 5 per cent. But can this continue?
“I would be fearful that some other city will position itself as an alternative to Dublin, with cheaper accommodation and better infrastructure,” he says, “It will be very sad if we don’t rectify this.”
When companies are making their decisions as to where to locate, they’ll generally have two or three cities in mind. If one option doesn’t suit the executive who’s going to move with the business, it can affect the decision. And this is now the fear with Dublin.
As O’Donnell notes, executives tend to live in areas like Ballsbridge, Dalkey and Howth, but here, as elsewhere, it’s hard to find homes. “It’s very difficult to get an executive home in places like that,” he says.
It’s a problem for people already based in Ireland, but can make people coming in from abroad think twice about such a move.
“I’d hate to think that we’re scoring lower than competitors on housing; it’s putting us at a disadvantage when decisions are being made,” says O’Donnell.
It’s particularly pertinent in the light of post-Brexit location decisions. While O’Donnell hasn’t seen much activity yet – “it’s very disappointing thus far” he says – Ireland has moved front and central in the minds of many Irish abroad, and Europeans.
Mariano Mamertino, EMEA economist with jobs site Indeed, says that searches for jobs in Ireland by jobseekers located in other EU countries (including the UK) as a share of total searches on the website are now running at levels 30 per cent ahead of where they were at two years ago. Of the 1.2 million or so unique users per month on Indeed.ie, a quarter come from candidates outside Ireland.
This could put even more pressure on the already razor-thin supply of rental properties coming to the market.
But it’s also offering opportunity for developers to bring new types of accommodation to the market. The buoyant jobs and rental market means one property investment group is expected to set a new rental record for Dublin when it launches its riverside development next year.
Kennedy Wilson will roll out the residential side of its Capital Docks development in the docklands in the second quarter of next year. With 190 apartments, many of which will have riverside views, the investment group is targeting the corporate side of the market. And it has a new hook to reel them in – fully serviced apartments.
According to Peter Collins, chief operating officer at Kennedy Wilson Europe, the group is likely to trial this approach at Capital Docks. It means that tenants can literally walk in with their suitcase and set up home, as the apartment will be fully kitted out with bed linen, utensils and televisions, with cleaning and concierge services also offered in the development.
The units may set a record for rents in Dublin. Currently two-beds in the docklands can command about €2,600-€2,700, but it’s expected that the fit-out of these new units means rents here will likely be in excess of that.
“Dublin is becoming that kind of market,” says Collins, noting that he sees demand from professionals who may live somewhere else, but work in Dublin “three, four or five days a week”.
Currently about 40-50 per cent of the group’s 2,000 strong apartment portfolio is rented by Irish people, with about 30-35 per cent from the UK and Europe, and the remainder from the US, Asia and the Middle East.
At Capital Dock however, Collins expects a slightly more international twist, attracted by the service on offer.
RENT CRISIS: COMPANIES LEND A HELPING HAND
Facebook: Temporary corporate accommodation, shipping of goods, storage, flights, sourcing a home, and helping with schools.
William Fry: Relocation advice and free monthly financial banking clinics with advisers from the main banks.
Mater Private: Joining bonuses for nurses of up to €6,000, including a €3,000 signing bonus, accommodation allowance for one month to the value of €1,500, and the cost of a return flight to the value of €250.
KPMG: Offers support for those coming from overseas tailored for individual circumstance in terms of associated costs and advice.
EY: Salary advance of up to €2,000 for graduates that can be used to cover housing-related costs, such as rental deposit; staff accommodation and shipping costs for experienced hires relocating.
BMC Software: Up to €3,000 to help with the costs of relocating to Ireland.
Deloitte: Relocation support to experienced hires relocating to Ireland from overseas and pay differential for graduates based in Dublin, as well as a managing-your-money programme to assist graduates.
PPD, Athlone: A €5,000 joining bonus to laboratory managers.
Convergys: Up to €1,250 in relocation allowance for French-speaking customer service role.
Matheson: Relocation assistance for candidates joining from overseas.
Zalando: Advice, financial assistance to cover relocation costs and temporary accommodation to new employees during their initial weeks in Dublin.
Intercom: Temporary accommodation in an apartment or Airbnb for a few weeks plus assistance from a relocation company.
UCD: Relocation expenses of up to €4,500, which can go towards the cost of temporary accommodation.
University of Limerick: Up to 75 per cent of the cost of short-term temporary accommodation, up to a maximum of €1,500 per month.
Teletech: Package includes seven nights’ hotel accommodation for customer service roles.
National Pen: Package includes flight ticket up to €150 with 2-4 nights of accommodation.