Brexit influx will increase State’s office rent bill

The State’s rental bill for office accommodation has increased by 10 per cent in three years, with further rises expected if Dublin becomes a destination of choice for multinational firms after Brexit, an expenditure review states.

The Office of Public Works (OPW) spent €87 million on rent for State bodies in 2015, which increased to €96 million last year. The cost of renting office space has increased due to competition in the growing economy, according to a Department of Public Expenditure audit.

The review warns that a potential influx of financial firms or investment banks to Dublin after Britain leaves the European Union will likely increase competition and cause the State’s rent bill to rise.

The need to hire more civil servants to deal with the potential fallout of Brexit will also require more office space, the review said.

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The cost of renting office space in Dublin has steadily increased since 2015. The cost of prime city centre office space has jumped from €430 per sq m in June 2014, to €700 by early this year, the review notes.

“Due to the ongoing lack of clarity around the UK exit strategy, it is not possible to say how much of the upward trend is due to increased demand arising out of Brexit.”

It adds that the increases in spending on rent “will not abate in the short to medium term”.

Rising rent has been driven by increased competition, with the Dublin office accommodation vacancy rate standing at 6 per cent in April, the report says. The pinch in terms of office accommodation supply should be seen in the context of a “near-total halt in construction during the economic downturn”, it said.

Approximately 40 per cent of office accommodation used by State bodies is leased, the report detailed.

Use of space

As the OPW finances State bodies’ rental accommodation, individual agencies and departments had “little incentive” to make the best use of space. This centralised approach had resulted in the “consideration of cost not being paramount” to requests from State bodies for extra office space, the report said.

A value-for-money study should be carried out to see how the amount of rent the State is paying compares to private businesses in the same area, the report said.

Last year the State paid €8.2 million to rent empty office space in Miesian Plaza, the former Bank of Ireland headquarters on Lower Baggot Street, due to delays moving civil service staff into the building.

The Department of Health and the Department of Children are in the process of relocating to the offices, which will house 950 civil service staff.

An extensive fit-out was required on the interior of the building, which will also house staff from the Department of Finance, and Public Expenditure.

Remley Developments, the property arm of beef magnate Larry Goodman's business empire, is the landlord of the premium office accommodation. A spokeswoman for the OPW said the State had secured a "competitive rent" on the offices.

The OPW plans to redevelop Hawkins House, the current office block housing the Department of Health staff, when they relocate to the new offices.

The figures on the amount of rent paid on the building was obtained in a recent parliamentary question from Fine Gael TD Peter Fitzpatrick.