With office space at a premium, can empty retail units provide a solution to Dublins property shortages?
One of the immediate tasks facing Niamh Bushnell, Dublins newly-appointed startup commissioner, is finding homes for her new charges. With Irelands international competitiveness at stake, building a culture for Irelands startups is at the top of her agenda.
On the surface, Niamhs problem might seem to be a good one to have a surge in new startups is, after all, a positive indicator of Irelands economic growth. Dublin has become home to hundreds of new businesses in recent years, founded on the back of Irelands flourishing tech, media and games sectors. With venture capital still flowing into Ireland, and tech businesses taking up ever larger swathes of office space, the countrys startup community is well-funded and planning for growth.
But the ongoing shortage of available offices in Dublin city centre is already having an impact on the ability of some small, rapidly-growing businesses to find a home in which to survive. With city centre vacancy rates low and leases lengthening, a lack of centrally-located, good quality offices is becoming a serious issue. This is a familiar problem for many businesses, but for startups, finding the right address means the difference between survival and failure.
One of the legacies of the Celtic Tiger is a strong network of incubation units for entrepreneurs to test the viability of their new businesses. The Digital Hub, based in St Jamess Gate offers flexible space for businesses in their first few years of operation. While it offers the mentoring, supervision and networking that are vital to new businesses, it cannot offer a long-term home.
Startup businesses, by their nature, have insecure futures and need accommodation that will let them grow, network and collaborate. Persuading landlords to enter into a lease with a business that did not exist three years ago is not easy. Landlords want tenants with a strong track record, and who are happy to sign a long lease. Startups want flexibility. For businesses whose customers are other high-tech industries, clustering is vital. Unlike many traditional firms, they dont need access to motorways or factories, but they do need access to brains, contacts and financing, as well as to their customers and rivals.
Dogpatch Labs, based in the former Meadows and Byrne unit in the IFSCs CHQ Building, is a good example of how a converted empty shop has become the perfect cluster for startups as they leave the safety of the incubation unit.
As Harry Browne, the architectural designer of Dogpatch Labs told me: Informal interactions between startup companies happen as chance encounters in break-out spaces, a similar concept adopted from hotel lobby design. Startup culture is opportunistic allowing them to thrive in buildings and spaces that have been left unused or even derelict. This can have a knock on effect to businesses in areas that may have fallen idle in recent years. An empty retail unit in the CHQ, for example, has been a great venue for a startup community.
The challenge, however, is to match the demands of landlords and tenants. According to Hugo Mahony of Dogpatch Labs: Theres often an incompatibility between a startup and a traditional landlord. Startups are unsuited to lengthy leases or onerous covenants. Providing three years of audited accounts to a landlord can be an issue when youve been trading for six months. A startup needs a fluid arrangement, whereby they can expand as required, or indeed fail without the burden of a lengthy lease increasing the risk factors associated with establishing a business.
Many recent property developments were based on the concept of having retail units on the ground floor, with offices or residential units above them.
With the economy changing, many of these retail units have never opened and some will likely never be viable. If the retail unit is never going to amount to much, it is better for everyone if it can be converted into a space which will be used by startups who are happy to occupy unusual office spaces if the location is right. This might present a better option to a landlord who is struggling to find a tenant for the shop.
There are clearly numerous properties throughout the City with vacant retail units at ground level that may never have been occupied due to a combination of insufficient footfall or inherent unviability, whose initial inclusion in schemes was mandated by the City Council as part of mixed use redevelopment proposals.
As Harry Browne of Dogpatch found when he oversaw the conversion of the Meadows and Byrne shop into offices, the regulatory cost of converting property from one use to another can be high, with planning permission and bureaucratic delays slowing the conversion and adding costs which are ultimately passed on as rent. The Fire Certificate application process and the new Building Control regulations have added complexities to an already bureaucratic planning process.
Where possible, planning and development regulations should be relaxed by either a variation of the zoning rules or amendment of the Planning Regulations to allow the flexible conversion of vacant commercial property from one use to another, appropriate use. Where they cannot be relaxed, councils and agencies should focus on guiding and supporting landlords and tenants through the conversion process. Adaption of first or second generation offices should be encouraged by giving some rates holidays to buildings which provided incubation space on weekly or monthly tenancies to startups.
Originally published in The Sunday Business Post.