Sunday Business Post - Property Cover Feature - April 29 2007
With prices static and in some cases falling and rents on the way up, is now a good time to consider buy-to-let? Dermot Corrigan reports.
The past year has seen continued strong growth in demand for rented property in Dublin. At the same time, the well-documented slowdown in the residential property market has meant that potential investors have a huge choice of properties open to them.
The question for these potential investors is whether there is a window of opportunity to get into the market at what could seem like bargain prices in a year a two, or whether the current uncertainty surrounding house prices means they should be more cautious. Jim Power, chief economist with Friends First, believes demand will remain strong in the rental market.
‘During the year to March, private sector rents went up by over 10 per cent. I feel that demand in the rental market will persist because of our growing population and strong inward migration,” he said.
A report released last month by property portal Daft.ie put the annual rate of growth in rents at 10.5 per cent between February 2006 and February 2007.This is the fastest growth rate since the Daft.ie index was introduced in 2002. The report found that, while rents had been increasing since the end of 2004, it was not until mid-2006 that the pace of growth grew into double digit figures.
According to Daft.ie, the nationwide average rent is now €1,334,the highest level since January 2002. A number of factors are combining to push rents up to this level - one is inward migration, which according to Power, looks set to continue for the foreseeable future.
‘‘If you are looking at 80,000 migrants coming into the country each year, they have to live somewhere,” he said.
The current uncertainty around interest rate increases and stamp duty changes is another factor impacting on the buy-to-let market, simultaneously depressing prices while increasing rental demand.
‘‘Some prospective first-time buyers are considering whether they can afford to purchase in the city centre or south Co Dublin - renting in those areas is perhaps a more affordable option for them, and that has helped to push rents up,” said Geoff Tucker, economist with Hooke & MacDonald.
According to the latest Daft.ie report released last month, the highest national jump in rents in the past year occurred in Dublin 2.The average rent for a one-bedroom home in the area increased by a staggering 24.3 per cent to an average of €1,234 per month; two-beds were up by 19.7 per cent to €1,679 per month.
‘‘We have seen rents rising in the Dublin 2 and Dublin 4 areas,” said Tucker. ‘‘A lot of developments that have been sold over the last two to three years are now coming onto the rental market. They offer a higher spec of accommodation and can command above-average rents.”
Tucker said that in the docklands, penthouse two-beds with waterfront views are renting for more than €2,000 a month. At the moment, investors can expect to pay upwards of €450,000 for new one-bedroom apartments in the docklands; tw o-beds are selling for more than €500,000 while three-beds cost from €750,000.
Another area where rents are performing well is Sandyford. The Daft.ie report found that the average rent for a two-bedroom apartment in Dublin 18 rose by 18.8 per cent to €1,574 per month.
Dublin 18 includes Sandyford, Stepaside, Kilternan and Carrickmines. These locations benefit from proximity to major employers and good transport links, such as the Luas and M50.
‘‘Sandyford is one of those areas where the rental market is going to really thrive,” said Tucker. ‘‘There are very few residential units that have been completed there yet, although there are quite a few developments that are on the market at the moment.”
Among the schemes on the market in the area at the moment is Rockbrook, which is situated directly opposite the Stillorgan Luas stop and offers one-bed apartments from €370,000 and three-beds from €625,000.These will be ready to rent from the end of this year into spring next year.
Potential investors should be aware that the increases being seen in Dublin rents are not evenly spread across all of the city or county. Rents for one-beds in Dublin 7, for example, grew by a relatively low 4.3 per cent, while two-beds in Dublin 13 and Dublin 7, three-beds in Dublin 24 and two-beds in Dublin 11 all experienced rental growth rates of less than 7 per cent last year.
However, Tucker said that this did not mean that buy-to-let investors should only concentrate on plusher southside postcodes - for example, rents for three-beds in Dublin 15 grew by 17.2 per cent.
‘‘Ballymun is another interesting area,’’ said Tucker. ‘‘Over the last 12 to 18 months we have seen a private rental market develop there; a number of developments have been completed and the rental market has really taken off. In particular, properties situated close to the proposed Metro North line are worth looking at.”
At the moment, one-bed Section 23 apartments in Ballymun can be bought for under €300,000, while two-beds are selling for under €350,000. Tucker said that investors now make up 26 per cent of all new home purchases in the greater Dublin area.
Yields
The Daft.ie report said that rental yields had increased for almost all accommodation types in Dublin in the last 12 months. The average rental yield for properties in Dublin is between 3.4 and 4 per cent, with the highest yields for properties in south Co Dublin.
‘‘Yields at the moment seem to depend on the location, but they have shifted upwards, particularly over the last six months,” said Tucker.
‘‘This reflects the moderation in price growth we have seen, combined with a stronger growth in rents. You will probably see yields edge upwards towards the 5 per cent mark by the end of this year.”
However, Tucker said that the majority of investors did not focus closely on rental yields. ‘‘Most investors are not overly dependent on surplus rental income,” he said.
‘‘They are getting into the market with the objective of long-term capital gain.”
Outside Dublin
Rents and yields are also rising inmost locations outside of Dublin, with particularly high rates of growth in certain towns around the country.
A new report from the estate agents network, Real Estate Alliance, has found that parts of Cork city, Trim, Navan, Maynooth and Monaghan are experiencing above-average growth in rents.
‘‘Yields are pretty much up across the board,” said Healy Hynes, vice-chairman of Real Estate Alliance. ‘‘They are particularly high in locations that are experiencing higher inward migration, are close to industries or that have been earmarked for decentralisation.”
Hynes said that recent job creation in the Monaghan area had helped rents rise by between 10 and 12 per cent in the last year. The Real Estate Alliance research showed that a property in Monaghan costing €270,000 would give a monthly rental return of €800, an annual yield of 3.55 per cent.
Investors should also be aware of the impact of decentralisation projects, said Hynes. For example, Tubbercurry in Co Sligo has seen a significant increase in rental interest due to the relocation of the Department of Community, Rural and Gaeltacht Affairs.
A property there costing €185,000 will bring in €600 a month in rent, giving an annual yield of 3.89 per cent.
Hynes said that other locations showing significant rental yields included Longford town, Killarney, Leitrim, Nenagh and Mullingar. According to Power, investors should look to the National Development Plan to see which areas will experience continued rental demand over the medium to long term.
‘‘The plan will give a significant economic boost to particular regions around the country,” he said. ‘‘For example, the road infrastructure to the south-east is going to be improved, so Waterford should benefit. The midlands should be opened up as well.”
Long-term view
Tucker said recent media speculation about stamp duty changes and market crash landings had not impacted greatly on the residential investor market.
‘‘A lot of the stamp duty debate has been about reducing the rates to help owner occupiers, whereas investors are ultimately driven by their expectations of the future prospects of the market,” he said.
‘‘Experienced investors are still confident about the long-term prospects.”
Research by Hooke & MacDonald has found that 43 per cent of investors are buying residential property for pension purposes, while 20 per cent are buying as a nest egg for children.
The research also found that 73 per cent of investors plan to hold onto their properties for more than five years, and half for more than ten.
Power said that buy-to-let investors should have realistic expectations of the likely appreciation of their properties in the next few years. ‘‘I believe we are now coming into a decade of more modest capital appreciation,” he said.
‘‘Over the next five years you will be doing well to get capital appreciation of 3 per cent per year on average, compared to 11 per cent over the last decade.”
Monday 30 April 2007
New strength in rent
Sunday 22 April 2007
Irish firms see benefits of niche recruiters
Sunday Business Post - Recruitment - April 22 2007
Companies are turning to specialist executive recruiters to fill a wider range of roles than ever before, Dermot Corrigan reports.
Hiring the best available talent to fill high-level positions is a priority for companies of all sizes across every sector. However, according to Sarah Meagher of McEvoy Associates Signium International, Irish organisations have been slow to recognise the value of niche agencies that specialise in hiring for high-level roles.
"The executive search market in Ireland is still relatively new in comparison to the UK and the US where search has been a common means of fulfilling strategic hiring requirements for many years," said Meagher.
"Here, search is often seen as a last resort when companies have tried other means to recruit and often only for higher value or executive level roles. There are still a proportion of ‘who do you know’ direct contacts made by employers here and sometimes clients will know the person in advance they wish to hire for a particular role. This does not happen as often in other countries.”
Executive search and selection is among the fastest growing HR specialisations internationally. According to the Association of Executive Search Consultants (AESC) the global executive search market industry experienced annual growth rates of 16.5 per cent from 1996 through 2000.
The association estimated it will grow by 12 per cent in 2007, bringing total revenue among its 350 member firms to $9.78 billion worldwide.
The US represents the largest executive search market in the world, with Britain in second place and Germany in third. Five AESC members have offices in Ireland, including Amrop, Boyden, McEvoy Associates Signium International, MERC Partners and Transearch International.
Executive search and selection is a confidential process where companies ask an agency to identify, attract and ultimately hire high calibre candidates, typically to fill strategic or specialist roles.
The agency receives a brief from its client, talks to them about what they require, uses their experience and contact network to draw up a shortlist of candidates, then confidentially approaches prospective hires. If required, the agency can also help with the interviewing and negotiating process.
Companies sometimes opt for the executive search process to gain access to candidates who are not actively on the market. Eamonn O’Reilly, joint managing director with Abrivia Recruitment Specialists, said that very senior staff are generally unlikely to regularly scan recruitment advertisements.
"The best people, in my experience, are not actively looking," said O'Reilly. "The vast majority are probably happy enough in what they are doing, but most people would consider opportunities as they are presented."
Companies may decide to turn to an executive search agency to fill a position for a number of other reasons. These include a lack of sufficient response to an advertisement, shortage of available talent, requirement to gain expertise in a particular area, the need for secrecy, a company experiencing significant growth, or the implementation of a new corporate objective.
Meagher said that Irish organisations turn to executive search and selection firms to ensure that their business is not harmed by a flawed recruitment process, which throws up the wrong candidate.
"There can be nothing more frustrating for a client than a bad hire," said Meagher. "The implications of a poor hire can last years in terms of damaged morale, opportunity cost and the loss of strategic momentum."
Sheamus Considine, partner with Amrop International Executive Search, said that as the Irish economy evolves towards a stronger knowledge base, executive search was becoming increasingly more important.
"You are looking to people, even at lower levels, to make complex decisions and be able to take in and process a lot of data," said Considine. "As we move towards this knowledge worker, senior management of these organisations requires a more complex set of skills and experience."
O’Reilly said that both indigenous operations, and multinational organisations based in Ireland, are now turning to executive search companies to fill a broad range of different roles.
“The search market in Ireland is maturing,” said O’Reilly. “Up to two years ago it was the preserve of chief executives and managing directors. It is now being widened to include senior managers or anybody lower down the reporting line who can provide a competitive edge to a company."
Brian Flynn, director executive search at Fastnet Recruitment, said that executive search is particularly useful to Irish companies operating in an increasingly globalised marketplace.
“The need to identify executives with international experience and the ability to build market share is now even more pressing,” he said “Executive search may be the only realistic way to secure the right blend of skills, experience and cultural compatibility.”
Meagher said that, as growth within the Irish economy has been concentrated in particular sectors, the labour market in these areas is particularly tight. She said businesses were turning to executive search firms to fill key positions.
"We have seen companies retain us for a broader range of roles, typically unique roles with a highly specialised skill set," said Meagher. "There is still an obvious talent shortage in Ireland in some particular growth industries and markets, for example funds, construction and bio-pharma. Increased regulation and governance in these areas has also fuelled demand for specialist directors and other key functions."
O’Reilly said that the experience and contacts which executive search agencies build up over years working in particular sectors can be particularly useful in identifying the best candidates for a position.
"We have been focusing on the legal, accountancy, insurance and banking sectors for years," he said. "We know the individuals out there at the various levels in those sectors, so if a client gives us a certain brief, we would know fairly quickly where those individuals would be. You need that level of contact and intelligence that can only come with years of being in a specific sector."
The compact nature of the Irish business world means that Irish executive search agencies have to be meticulous.
"Compared to say the US or the UK, the size of the executive search market in Ireland is very small, so the need to be extremely discreet and confidential is upmost," said O'Reilly.
Considine said that high-level executives took a careful approach to prospective moves.
"A couple of years ago around the time of the dotcom boom there was a type of domino effect across the entire management sector in Ireland," he said.
"That more or less has stopped. What you find now with candidates is that they are more reflective on the opportunity, with more consideration given to work life balance and where the opportunity might lead to in terms of career progression. The commute is becoming a bigger factor, which is affecting our ability to attract people to the greater Dublin area in particular."
O’Reilly said that more and more executive search agencies were looking abroad to identify potential hires.
"Given the development in technology, it is not as cumbersome as it used to be to identify and contact candidates abroad, whether in London, the Far East, Australia or America," said O'Reilly.
The cost of an executive search is typically a percentage of the position’s annual salary. Meagher said that clients who ask an executive search agency to help find the right candidate should be aware that the task requires a thorough approach.
"The big difficulty for some companies is that search as a holistic process that can take time to deliver a successful outcome," she said. "It is a very labour intensive process and there are no shortcuts, the ground must be covered every time and every new assignment means fresh research to be commenced from scratch."
Considine said that search firms will typically form a close relationship with their client and investigated their business to ensure the right fit with recommended hires.
"To be successful you have to understand how that organisation works, how it makes decisions and what its strategic direction and vision are,” he said.
Flynn said that relationships between the client and an agency often developed over time.
“The expectation is that the executive search firm will assist the client in sourcing leaders and potential leaders that will fit the culture and needs of the company. That can ultimately make such a difference in driving the necessary performance,” he said.
Monday 16 April 2007
Dublin firm involved in $80m Orlando scheme
Sunday Business Post - Overseas Property Supplement - April 15 2007
Dublin-based firm Investor First has announced a finance deal worth $80 million for a condo-hotel development in Orlando, Florida.
The first phase of the Emerald Cay project, which is due for completion in September 2009, contains 110 units on two acres, while the second comprises 90 units on 2.56 acres.
The dual hotel and residential development is centrally located within Orlando’s ‘Golden Triangle’, close to Disney World, Sea World and Universal Studios.
‘‘The location would be the equivalent of Jurys in Dublin,” said James Carroll, managing director of Investor First, which sourced both the private equity and mezzanine finance to support the development.
Carroll said that most of the $10 million equity finance was coming from one source, and having that in place early allowed Investor First to then bring in additional investors.
‘‘We first brought in one lead Irish investor and subsequently a number of smaller investors came on board,” he said. ‘‘Subsidiary investors would have come in for around $500,000.”
Carroll said that although the US and, particularly, the Florida property markets had experienced some turbulence in the last few years, high potential opportunities remained for Irish investors.
‘‘In some ways a crash is not a bad thing because it brings a bit of sense into the market,” he said. ‘‘It can be easier to make money in the hard times, because there is not every idiot trying to buy the same land for ridiculous prices.”
Florida remains particularly advantageous, said Carroll.
‘‘America is like a funnel. The baby boomers are moving south.”
Carroll said that the size of the US property market meant it could ride out temporary ups and downs.
‘‘America is the biggest economy in the world. It is surprising how many Irish people seem to equate, in their own heads, a shopping centre in the equivalent of Foxrock in Bratislava with a shopping centre in the Foxrock of Chicago.
‘‘They are just not the same in terms of risk profile. America is the most sophisticated and the most competitive property market in the world, “ said Carroll.
Investor First opened an office in Charlotte, Florida, four years ago. It is partnered with Capital Sales Center, a Floridabased residential sales and marketing company, and the Landsmith Group, which is currently developing more than 700 units spread over various other Orlando projects, in the Emerald Cay development.
‘‘We have developed a relationship with number of local developers, which makes planning, development and entitlement work much easier,” said Carroll.
‘‘America is no different than anywhere else - if you do not have local knowledge to show you where the best place to buy is, and when the right time to buy is, you will take a hammering.”
Investor First recently sourced the Philadelphia Airport Business Complex, a $33 million industrial and office site, for the Irish development group Castleway Developments.
Glandore Business Centres opens new €30m Dublin facility
Sunday Business Post - Done Deal - April 15 2007
Irish serviced office facilities provider Glandore Business Centres has invested €30 million to purchase, renovate and furnish its newly opened Fitzwilliam Hall centre.
The centre now offers 30,000 square feet of serviced office space and conferencing facilities in Dublin’s city centre.
The landmark Georgian building, which was previously owned by Bank of Ireland, is at the entrance to Fitzwilliam Place and overlooks the Grand Canal.
The property went on the market in 2003, and the purchase was completed in May 2005.
Refurbishment work, carried out by PJ Walls, began in June 2005 and was completed in May 2006.
The €30 million outlay is comprised of €22 million for the purchase of the property and €8 million for the refurbishment.
Michael Kelly, managing director of Glandore Business Centres, said the building was a perfect fit with its requirements.
‘‘It has a quality location, almost on Stephen’s Green,” Kelly said. ‘‘It is also a high quality building and the layout suited our purpose.”
The Fitzwilliam Hall centre offers serviced and virtual office space which includes mail and messaging handling, reception services and office support.
Costs such as property rates, essential services and insurance are covered within the monthly charge.
The building is now 90 per cent occupied and has the capacity for up to 250 work stations.
‘‘Our service is particularly attractive to small or medium-sized companies, as they can share services rather than having to provide them themselves,” Kelly said.
‘‘For example, they can hire a meeting room for an hour as opposed to having a meeting room sitting there except for two meetings a month.”
Kelly said the investment included a €1 million spend on IT systems.
‘‘We have Cat 6 cabling, a state of the art data centre and internal IT support and internet connectivity at whatever level you want,” he said.
Glandore Business Centres was founded by Kelly in 2001.
Turnover for 2006 was about €4 million. The company employs 17 staff and also operates facilities at 33 Fitzwilliam Square, Dublin 2 and Arthur House in Belfast.
Kelly said a fourth property, in the Dublin area, was currently under consideration.
Monday 9 April 2007
Stars of the mini screen
Sunday Business Post - Media & Marketing - April 8 2007
Eamon Dunphy, George Hook and Tom Dunne have all answered the call of the networks and are starring in television shows produced specially for mobile phones, writes Dermot Corrigan
Irish mobile phone networks are now offering a variety of original TV content that users can watch on the latest mobile handsets. However, opinions differ across the sector as to how the dedicated 'made-for-mobile' content space will develop.
O2, Vodafone and 3 have all produced and broadcasted dedicated mobile TV content for their users in the recent past. Most of these shows are fronted by well known personalities, and they generally feature entertainment or sports content.
David Riley, Head of Entertainment with 3 in Ireland, said: "We see a gap in the marketplace particuarly for compelling personality-driven TV content, Football and music are two of the strongest content areas."
3's dedicated mobile TV programming includes music show The Hive with Today FM presenter Tom Dunne and Eamon Dunphy's Last Word on Football. The Hive is a fortnightly music magazine-style show, featuring live performances and interviews from Irish and international bands, gig guides, album reviews, and a download music chart.
Dunphy's Last Word on Football is a twice-weekly programme where the controversial pundit gives his characteristically forthright views and predictions on English Premiership developments and the other football news of the day. It is filmed on Thursdays and a preview is available for download on Fridays. The actual 15-minute TV show comes out on Monday, when it is streamed.
O2’s TV mobile specific TV programming continues the sporting theme. Rod O'Callaghan, Head of Entertainment Services with O2 Ireland, said the company launched The Snug with George Hook and Brent Pope in the run up to the Six Nations rugby championship. This was a pre and post-match analysis programme for rugby fans available on I-Mode handsets and also on O2.ie.
"We also offered Brian O'Driscoll's Six Nations diary which was available on I-Mode and O2.ie exclusively," said O'Callaghan.
Vodafone is not as confident about the potential success of made for mobile TV content in the Irish market. When they launched their 3G service in November, 2004, it included a free-to-view TV show called Access Music TV with Dave Fanning.
This was a 15 minute package of highlights from Fanning's back catalogue of music television programming, with the RTE DJ providing a linking voiceover.
"We tried it and it worked very well initially for us," said Sarah Chapman, Head of Content Services with Vodafone Ireland. "But when we added access to music TV channels such as The Box we found that customers prefer the usability and variety of programming that was available within that mobile TV offering, so we did not continue with the service."
Chapman said that Vodafone have no plans at present to produce any more original content for distribution over their mobile network.
"We try and play to our core strengths," she said. "We have found mobile TV customers want a large channel line-up, and partnering with somebody like Sky makes the overall customer proposition the best it can be."
Vodafone's mobile TV packages include the Sky News & Sports Pack, Sky Entertainment Pack and Sky Music packs, as well as Premiership football highlights. O2 and 3 also provide a variety of existing television programming, which is adapted in-house for viewing on a mobile phone screen, including news, sport, weather and comedy shows. Meteor do not currently offer any made for mobile or existing TV content.
O'Callaghan said that O2 were observing the market closely to see if customers prefer made for mobile content over conventional TV programmes.
"We believe there is scope for both original and existing TV content," he said. "We are currently conducting a mobile TV trial in the greater Dublin area. This is broadcast TV on mobile, as you would see it on TV at home. 350 customers are trialling it at the moment on the Nokia N92. We will be in a position to compare the results at the end of this trial."
The networks declined to give out specific information on the download numbers of their made for mobile TV offerings, however both 3 and O2 said they were happy with the take-up from users.
"Usage figures are commercially sensitive however the demand we have seen so far for these services is extremely encouraging and it continues to grow as customers become more familiar with these services," said O'Callaghan.
Riley said that more than half of 3's Irish customers watch TV content on their mobiles.
Both O2 and 3 are happy to press on and continue to commission and offer made for mobile TV programming.
"We have seen a significant increase in the uptake of these services and this has been encouraging," said O'Callaghan. "As technology evolves more applications will become available. We will continue to explore the area of content and will assess further opportunities as they arise."
"3 is looking at a number of different opportunities at the moment," said Riley. "I think the entertainment space on mobiles is going to develop greatly. TV made for mobile is a strong success story."
At present most mobile TV in Ireland is viewed 3G handsets (3, O2 and Vodafone) or I-Mode enabled handsets (O2). Last September ComReg awarded special licenses to O2 and 3 to broadcast television over a competing technology to 3G called Digital Video Broadcasting over Handhelds (DVB-H).
Made for mobile TV content is generally offered at no extra charge to both bill pay and pre-pay subscribers. Users can be asked to pay for existing content. For example a weekly subscription to Vodafone's Sky News Channel costs €1.99, while watching a Little Britain or Fr Ted clip on a 3 mobile costs 49c.
The mobile providers typically use small independent production houses to produce their made for mobile TV content.
For example the Dunphy football and Hook rugby shows are produced by Random Thoughts Media, a Dublin based digital media company. Ballywire Media and Videos On The Net are two other independents who provide televisual content for O2.
