The two big projects are part of a response to heightened interest in the city
Developers have begun to respond to demand for commercial property in Galway, and Gerry Barrett is leading the charge with two major city centre projects. Similarly, investors are also demonstrating increased interest in the City of the Tribes as reflected in recent deals.
Some of the new projects should help address concern about office supply in a recent Cushman & Wakefield report which said “the limited supply of Grade A office accommodation is hampering the market both in terms of new office entrants and existing occupiers seeking to expand in Galway. Just two office schemes are under construction in Galway, measuring a combined 10,800 square metres. With both of these located in the suburbs, namely the refurbishment of No 1 CityEast and Block 5, Parkmore East.”
However, Patricia Staunton, head of Cushman & Wakefield’s Galway office said that “delivery of these will do little to address the dearth of large office space in the city centre”.
That’s where Gerry Barrett comes in. His company Edward Capital is expected to begin work in February next on the development of Bonham Quay which will comprise four blocks accommodating 26,000 square metres of Grade A offices and 2,005 square metres of retail space set in a landscaped plaza overlooking Galway Docks. It is located within walking distance of Ceannt railway station.
Barrett has also won the tender to develop a new heart for the city on 8.2 acres of the CIE site adjoining the station in a project currently known as Ceannt Quarter.
It is expected to accommodate hundreds of dwellings, a hotel, retail and public open space.
In the northeastern suburbs, McDonogh Capital Investments has applied for planning permission for the first phase of its €120 million Eastgate Business Campus.
Adjoining McDonogh Trade Centre and Ballybrit Industrial Estate, it is also near the planned N6 Galway city ring road. The first phase will comprise 17,300 square metres of Grade A offices in three buildings which will be situated around a public plaza. The overall development will also include a hotel.
A long-established Galway business family, the McDonoghs developed the Dockgate building and Jurys Inn hotel in the city and have also been involved in the delivery of 74,332 square metres of office and hotel space in Ireland, France and Belgium.
Meanwhile US investor Oaktree Capital is to develop an 11,612 square metre extension of its Gateway Retail Park in the western suburb of Knocknacarra in what will be the first major retail development outside Dublin since the crash.
The project, which is being managed by Sigma Retail Partners and is due for completion late next year, has already signed up Harvey Norman for 5,574 square metres and attracted strong interest from other retailers.
Darren Peavoy from letting agent Bannon said it aimed to attract fashion outlets to some of the remaining space.
Sigma is also considering further development on the site, including leisure and residential projects.
With Galway’s strong tourist attractions, the hospitality sector is also attracting attention. Earlier this month local contractor JJ Rhattigan began work on a new 130-bedroom hotel at Prospect Hill for Press Up Entertainment.
Recent days also saw the Burkeway Group purchase the 112 bed-space Barnacles Hostel on Quay Street in the city centre in a CBRE-brokered deal for around €4 million. Burkeway will add it to its Snoozles hostel chain.
Investor interest is also increasing. Rosemary Casey of TWM said Galway commercial investments exceeded €90 million in the first nine months of this year. Exeter Property acquired Cúirt na Coirbre with 389 student bed spaces for €35 million for a net initial yield of 5.8 per cent.
Mixed use and retail accounted for about €33.7 million of the investments deals and this included Friends First’s purchase of Citypoint in the city centre for about €21.83 million. Office investments accounted for about €22 million.
Casey said funds and private investors had asked TWM to find significant Galway commercial investments. However, supply has been limited due to a lack of new developments in the city centre and the historic buildings, many of which are family-owned and operated retail businesses on the main shopping streets of Shop Street and William Street.
“This has also limited opportunities for retailers . . . resulting in a notable absence of high street brands . . . Both national and international brands have expressed current requirements for Galway if their criteria for larger, more regular floor-plates could be met,” she said.
A further test of this investor interest will be the forthcoming sale of Westside Shopping Centre, for which Cushman & Wakefield is guiding €9.6 million. Fully let, it generates net operating income of more than €750,000.
Development activity has also begun in the industrial market where availability has hit its lowest level in ten years at 34,950 square metres, according to Cushman & Wakefield research.
It shows that only six units with a combined 10,350 square metres are Grade A and the majority is Grade B.
Much of the other available stock is considered unfit for modern uses. The only unit currently being speculatively built is at Mervue Business Park and it is expected to be used as offices. The IDA is expected to get a 3,250 square metre office and light industrial/manufacturing space under way in the new year at its Parkmore estate.
Patricia Staunton said rents which had already increased to €80 per square metre could reach €90 by 2021, while industrial yields could remain at 7.75 per cent.