By Business & Finance Jones Lang LaSalle director Fionnuala O’Buachalla looks at why large international companies are setting up headquarters in Ireland.
Everyone has heard of them: we do our shopping on Amazon; we follow our favourite trends and celebrities on Twitter; we use Microsoft at home and in the office; we check out potential clients and employees on LinkedIn; we google what we don’t know; and then we check our Facebook pages to catch up with friends and family. The common theme? All of these companies have chosen Ireland as the location of choice for their European headquarters.
At Jones Lang LaSalle we work with many international corporates in assisting them in setting up in Ireland. Whether these clients come via our international desks on the east and west coast of America, or through our own office in Dublin, the common question they all ask is, “Why is everyone locating in Ireland?”
Yes, we have an extremely competitive corporate tax rate of 12.5%, but that can’t be the only reason. And it isn’t. They say that a recession is the best time for entrepreneurs to develop; the same applies to corporates locating in Dublin. While many of the big international companies have been here for numerous years, most of the current wave of high profile companies have all located and expanded here since 2008, coinciding with the downturn in the economic climate. So what is the relevance? In terms of property – quite a lot.
As a result of a significant change in 2008 in the way that commercial leases are treated for VAT, occupiers are no longer forced to take leases longer than 20 years. This, combined with a vacancy rate that went from 11.3% in 2007 to 22% in 2009, meant that tenants could finally get the flexibility they require to make an investment in Ireland. So instead of having to sign a 25-year lease with a break option at year 10 to 15, tenants can now get a 10-year lease with a break option at year five, or sometimes earlier. From an occupier’s perspective, if a standard business plan is three to five years, then the lease term should be similar. This makes Ireland comparable with the majority of other international locations who are all competing for the same occupiers.
It is no coincidence that in addition to flexibility, corporates locating in Ireland can now avail of competitive rents. Although Dublin is a European capital city, in terms of size and infrastructure it should be compared to a city like Manchester. At the height of the market, rents in Dublin hit €65 per sq ft per annum – more expensive than parts of London. Now prime rents of €30 per sq ft in the city centre and €18 per sq ft in the suburbs give Dublin a competitive advantage. Thankfully, the reduction in rents has not impacted the quality of available office space. Standard landlord specification in Dublin includes raised access floors, floor boxes wired for power, suspended ceilings and light fittings, air conditioning, and completed lobbies and toilets. This level of specification can mean a reduction in the initial capital investment an occupier has to make, especially when compared to other cities. Another important factor is that Ireland is a safe and easy place to conduct business.
We have a low corporate tax rate, we have lots of office space (7 million sq ft in Dublin) and we have flexible leases allowing companies to expand and we have low rents. But all of this is irrelevant without the people – both in respect of employees already based in Ireland and those companies who are trying to attract existing staff to relocate to Ireland. Ireland has one of the youngest workforces in Europe (35% under 25 years of age) and the number of people with third-level qualifications has doubled in the last 20 years from 14% to 31%. When you combine these positive facts with our current high unemployment rate (14.1%) it provides for a large skilled and readily available labour pool for companies to choose from.
At Jones Lang LaSalle, we work with a variety of corporates, many of whom are growing and expanding their businesses in Ireland. While the common theme is Ireland, the drivers for their preferred location within Ireland can be very diverse. Some companies will only locate in Dublin, others will only locate outside the capital, while there are others who may choose to bi-locate. As a result, we cover all of Ireland. We have worked with RSA Insurance, who have offices in Belfast and Dublin and made a significant move from Dublin city to the suburbs, with Cisco who have headquarter buildings in East Point and in Galway and with BNY Mellon who have a number of locations in Dublin city as well as offices in Cork, Wexford and Navan.
Don’t just take our word for why Ireland is a great place to locate your business. According to the IDA, 140 foreign companies either expanded or launched in Ireland in 2012 – they can’t all be coming for the Guinness!
*This article was originally published in Doing Business in Ireland 2013.
