Homeless charity Simon takes over bank, while other deals being done despite downturn

The Q3 report also highlights how the second city’s office market is starting to witness the emergence of ‘grey space,’ lagging the trend in Dublin and internationally where existing occupiers seek to reduce their footprint, adding to vacancy rates even as new office buildings come to fruition.

Among the activity monitored is the leasing of the former bank branch of KBC at 4 Lapps Quay to Cork Simon for HQ/admin purposes. It’s going to a former converted 18th century warehouse/flour store vacated over a year ago by Belgian-based bank KBC having opened there in 2013, with a second Cork branch following at the time in Wilton. KBC took on No 4 with an initial €100,000 pa rent.

Over a decade, KBC grew to have 12% of the Irish mortgage market. Now, ironically, following KBC’s departure and the sale of its loans, bank branch sales /lease deals are also following, including the off-market letting of 4 Lapps Quay to a housing charity, Cork Simon Community.

Cork Simon have a shelter nearby at Mill House on Anderson’s Quay, one of four high-support houses they currently operate in the city for up to 50 men and women with housing needs, among other outreach services and they also have planning permission for a 78-bed unit by Kent Railway Station.

The quiet deal was for the protected structure No 4 Lapps Quay, totalling about 6,600 sq ft over three levels in a surprisingly good B2 rated building directly facing Cork City Hall, alongside SIPTU.

It’s understood from market sources the owners of No 4 Lapps Quay are the Neville family, and the rent paid via negotiations with agents Savills by Cork Simon is c €135,000 pa in a deal on the well-finished offices which was agreed several months ago.

Meanwhile, the return of law firm RDJ to South Mall from Cork’s suburban Mahon, first reported by the Irish Examiner and since more widely reported and welcomed as a positive for the city centre, has followed through to occupancy at No 85 South Mall, a JCD Group building.

RDJ have taken approx. 1,600 sq m/c 18,000 sq ft at No 85’s ground and first floor level, slightly less than they’d occupied in City Gate, with the move including all open-plan office configuration.

Since the successful lease earlier this year at undisclosed terms, the O’Flynn Group have now sold the building/investment at 1 Westfield in Ballincollig to Primary Health Properties PLC for €31.35m, or a net initial yield (NIY) of 5.3%. Lisney acted for the HSE and CBRE and Cushman & Wakefield acted for the vendors.

According to Lisney, there were only two investment transactions in Cork in Q3 2023, totalling €33.95m and accounting for 7.6% of the market nationwide. Joining the Westfield deal at €31.35m was the retail investment sale of 39 Patrick Street (occupied by North Face) which was sold to a private Irish investor for €2.6m, at a NIY of 7.0%.

While officially there are some €20m worth of ‘on market’ investment offers currently in the city centre (inc at Opera Lane), a greater sum is likely available as “given the continued amount of activity occurring off-market, this supply figure is likely higher,” says this week’s Q3 report, noting prime retail yields have stood steady at 7.25%, and prime office yields are unchanged at 6.75%.

Notable in the office sector is the rise of grey space, with a number of tenants having excess capacity and which is available to sub-let.

“The shift towards hybrid working models has led to an increase in grey space in office markets globally, particularly among tech occupiers, as job cuts and hiring freezes have slowed demand in this sector. While this has been impacting Dublin since 2020, the Cork office market has only started to see an increase in grey space in recent months. This is due to occupiers reducing their office footprint, particularly in suburban locations,” say Lisney.

Among the space recently vacated in the city was that of serviced office provider Iconic at Navigation Square after just a year or so into a lease with O’Callaghan Properties, while at the nearby One Albert Quay a quantum of space occupied by Johnon Controls has just been been taken on by PwC, taking an additional half a floor plus use of the building’s top level canteen facilities.

According to the Cork Q3 report, “prime city centre headline rents remained stable at €325 psm (€30 psf), having fallen at the beginning of 2023 for the first time since the end of 2020.” Suburban prime headline rates remained stable at €230 psm (€21 psf) and headline rents at South Mall (with the exception of No 85) fell to €237 psm (€22 psf) from €248 psm (€23 psf) in Q2 2023, it’s noted.

By the end of September 2023, there was 86,800 sq m of available office accommodation in Cork, similar to the previous quarter with the largest stock of vacant space in the city centre, at 46% of all supply, followed by the south suburbs (34%), the west suburbs (12%), the north suburbs (6%) and the east suburbs (2%).

Overall Cork vacancy rate decreased slightly in Q3, to 13.8% from 13.9% in Q2: vacancy rate in the city centre was 17.5%, down from 18.5% in Q2, and suburban vacancy rate was at 11.7%, up from 11.3% in the previous quarter.

DETAILS: Lisney.com