Park West prices for office blocks underline value collapse

Dublin's under-performing Park West Business Park off the M50 has been given a new lease of life following the purchase by Allianz Worldwide Care of four office buildings there to accommodate most of its 800 staff.

The company had been renting office space in the park since it was formed in 2000 and has now become the largest occupier after buying more than 7,432sq m (80,000sq ft) from a range of owners and renting a further 2,322sq m (25,000sq ft).

The Lisney agency advised the company which bought the blocks at prices ranging from €450 to €538 per sq m (€42 to €50 per sq ft) – a fraction of the price originally paid for them in the early 1990s. Another stand-alone office building in Park West has just been sold at a significant discount. The IT services company, Island Networks, has purchased Block 7 for €1,125,000 – a long way from the €4 million paid for it by two private investors 18 years ago.

The three-storey block extending to 2,279sq m (24,530sq ft) will be seen as particularly good value for the new owner, working out at €493 per sq m ( €45.86 per sq ft) or about one-third of its replacement cost. Two of the floors are currently rented by a telecom sales company on a short lease at a rent of €103,600.

Ollie Lyons of TWM Select, who handled the sale, said there was strong competition for similar office buildings because of the shortage of blocks costing under €5 million in the central business district.

Dramatic collapse

The price paid for Block 7 nevertheless underlines the dramatic collapse in values at Park West over recent years despite the high-quality finish of the buildings and their convenient location close to an excellent road network. One investment agent blamed the fall in capital values largely on overdevelopment of similar-sized office blocks and the strict taxation conditions which applied to lettings.

The other sell-offs has included Block 12c, another three-storey building with 1,759sq m (18,934 sq ft) which changed hands two years ago at a mere €735,000 – a full 89 per cent less than the €6,353,240 paid for it by 13 investors around 1999. Around the same time Block 11b,with a slightly larger floor area of 1,976sq m (21,269sq ft) was sold off at around €1 million, a fraction of the €5,080,000 it made in 1998 when it was bought by a 14-strong investment consortium.

Harcourt Developments built a string of attractive stand-alone office buildings in Park West mainly in the late 1990s which were snatched up by groups of investors wanting to avail of valuable tax breaks. In most (or possibly all) cases such as in Block 7 the development company guaranteed the rent for the first three years to allow the new owners time to find suitable tenants.

The appeal of the scheme centred on the fact that investors could avail of 100 per cent capital allowances against all income with 25 per cent available in the first year and 4 per cent per annum thereafter. However, some blocks proved impossible to let because under the tight restrictions imposed by the Revenue Commissioners companies renting the blocks had to be involved in an internationally-traded service, such as R&D or IT.

Some investors let their blocks but others were not so lucky. With the tax breaks well and truly over, many of the groups of owners have managed to sell on their investments . . . but at a considerable loss.