The Financial Times, Saturday, November 21st 2015
The cluster of tech companies straddling a portion of the river Liffey in central Dublin has earned its rough square mile the predictable — if by now slightly irritating — moniker: “Silicon Docks”.
Bandwagoning aside, since the financial crash of 2008 delivered Ireland one of the worst economic blows in Europe and a burst housing bubble left an estimated 300,000 new homes unfinished or unoccupied, this once unloved relic of Dublin’s industrial past is being venerated by some as a symbol of a more confident, more cosmopolitan and, ultimately, a more viable Ireland.
“Ireland is a very different place to what it was four or five years ago,” says Martin Shanahan, chief executive of the Industrial Development Authority (IDA), an agency that works alongside the state to promote foreign direct investment. “Ireland is one of the most successful countries in the world at attracting FDI,” he says. “And, in particular, companies have been drawn to Dublin, and, in particular, to the Dublin docklands.”
The arrival of global tech brands in the area started with a fledgling Google in 2004. The cluster now includes the European headquarters of Facebook, Twitter, LinkedIn and Dropbox, all attracted, according to the IDA, by a mixture of local talent, seed-funding opportunities and, crucially perhaps, Ireland’s low corporation tax rate of 12.5 per cent, with tax credits for firms involved in research and development.
However, opinion is divided. Memories of the bad times are still raw: home values were cut in half during the downturn and when the first wave of construction in Dublin’s docklands crashed it left a swath of new houses and offices unused and unlet. Some homes still in the construction or planning stages were suspended indefinitely, like the U2 Tower. Designed by Norman Foster, plans for this 120-metre-tall apartment building depicted a great triangle projecting over the Liffey, with an egg-shaped penthouse at its apex due to house the rock band’s recording studio. Finally binned in 2013, it had become a bit of a joke, a reminder of the country’s overreaching ambition.
Now, with a new flock of tower cranes roosting beside the docks, some are feeling the unmistakable twinge of déjà vu.
“The fact is there has been a severe shortage of homes both to buy and to rent in Dublin for the past two or three years,” says Professor Ronan Lyons, an economist at Trinity College, Dublin. While vacant homes still litter the suburbs, the lull in construction during the downturn has resulted in a lack of apartments coming to market in the city centre. Such is the problem, says Lyons, that some of the big tech firms offer employees a bonus if they put up a new colleague for a few months while they find a place of their own.
It is not just the odd sofa that could get worn out. The IDA, the National Competitiveness Council and the department of finance all cite the lack of housing as a serious brake on Dublin’s economic growth. In response, the government has set aside more than half its strategic development zone (SDZ) — a 22-hectare site in the heart of the docklands — for new residential projects. Buildings within the SDZ benefit from a fast-tracked planning process and, as a result, about 2,600 units are due to be built over the next five to seven years, according to property consultants Ganly Walters.
One new major mixed-use development, Capital Dock, will comprise 204 apartments on the south side of the docks. The development is backed by the National Asset Management Agency — a body set up in 2009 to act as Ireland’s bad bank by isolating high-risk securities. Savills is partnering with the agency on the redevelopment of Boland’s Mill, a 19th-century flour mill, into a mixed-use site with 41 apartments and a little under 30,000 sq metres of office space.
The going rate for apartments in Silicon Docks is about €550 per sq ft, says Andrew Sherry, a chartered surveyor at Savills Ireland. By 2018, when Boland’s Mill is finished, he estimates the smart units could go for €700 per sq ft.
In Grand Canal Dock, a two-bedroom apartment is on sale for €450,000 through local agents Owen Reily, while a three-bedroom apartment at 505 Shelbourne Plaza is being marketed by Savills for €950,000.
Even if prices do reach €700 per sq ft, they will still be considerably cheaper than Dublin’s smartest neighbourhoods. In Ballsbridge, a five-minute drive from the docks, Knight Frank is selling a six-bedroom family home for €4m, which is about €1,000 per sq ft.
Artists’ images of the dockland developments envisage a new high-gloss city district, a world away from the docklands’ industrial heyday in the 19th century. Then live cattle would be driven beside the docks along the North Wall, soiling the streets and causing havoc with the traffic. From the 1950s, when containerisation became widespread, the slow dereliction of the docklands began to creep in.
Momentum changed during the construction boom of the mid-1990s, but unlike then the housing market in Dublin today is not so heavily reliant on mortgage credit. Owen Reilly, the director of the real estate firm, estimates that about 90 per cent of his clients are cash buyers. “We’re seeing little or no flexibility from the banks this time,” he says.
Maintaining Ireland’s competitive edge is a major concern, however. Despite finance minister Michael Noonan’s assertions to the contrary, if the EU introduces a minimum level of corporation tax — a move that is popular in Germany and France — might the Googles and Facebooks pack up their MacBooks and leave?
“If these companies wanted to pay no tax, there’s plenty of places that they could do that,” says Lyons. “I get the sense that a lot of these companies are happy. That’s not to say Dublin is perfect, but it’s an easy enough place to attract skilled labour to, and that is not easily replicable everywhere.”
For the half a million or so workers that left in the bad times, John McCartney, head of research at Savills Ireland, thinks that returning now might be a lucrative move.
Over a pint with a friend who moved to London a few years ago, McCartney was trying to gauge what his friend could afford if he came back to Dublin. “It dawned on me that there were no areas outside his reach any more,” he says. “And because I’m a small and bitter man, I worked it out.” For someone selling the average Dublin home in 2008, converting it into sterling and buying a similar house in London, they would have almost £50,000 left over, he says. If they’d banked that and sold the London house in June this year, after converting it back into euros, they would have amassed a windfall, by his reckoning, of more than €510,000.
“I wish him well,” he says, ruefully.
While Google and Facebook might be the headline acts at Dublin’s Silicon Docks, the tech cluster that has grown up in the area has proved fertile ground for hundreds of homegrown start-ups, writes Dearbhla Gavin.
Among them is House My Dog, an internet company that has been described as an “Airbnb for dogs”. Set up in 2014 by brothers James and Timothy McEIroy, the service connects dog owners with vetted sitters when they go on holiday. “It’s the cage-free alternative to kennels,” says Timothy.
The brothers say setting up near other tech groups in Dublin’s docklands has helped them win recognition for the business. “In Silicon Docks you can easily bump into staff at some of the world’s largest tech companies, which can be a great way of naturally networking and getting your start-up on their radar,” says James.
However, it is a start-up scene that might never have come about were it not for the evolution of pay-per-use working spaces, such as Dogpatch Labs in the CHQ Building, which was started when a lack of supply caused Dublin’s office rates to soar.
While some have criticised Dogpatch for making it harder for start-ups to secure future investment opportunities, it is actively building connections to the tech giants. The company has partnered with Google to create a Global Tech Hub Network, granting its members access to affiliated Google campuses across the world.
● Ireland posted the highest economic growth in Europe last year at 7.7 per cent
● New mortgage lending caps introduced in January require first-time buyers to have a deposit of at least 10 per cent of the sale price and 20 per cent for everyone else
● Flights from Dublin international airport to London Gatwick take about one hour and 15 minutes
● Foreign buyers face few restrictions. Stamp duty is 1 per cent for properties under €1m and 2 per cent on values above
€500,000 A two-bedroom apartment on the north side of Dublin’s docklands
€1m A three-bedroom apartment in one of the new developments in Silicon Docks
€5m A six-bedroom, Edwardian home in a smart Dublin suburb, such as Ballsbridge
To read the article on-line, please click here.
The Financial Times, Saturday, November 21st 2015