Ireland: Real Estate Update: Tech Spec For Workspace

Last Updated: 2 December 2015
Article by Kevin Hoy

Housing nine of the top ten global ICT companies, Ireland has become an international hub for tech activity. We examine some of the requirements which are important to tech tenants when leasing premises in Ireland and contrast those with the often conflicting needs of landlords. We also suggest steps Ireland could take to provide more suitable office space for tech tenants.

A comparison of tech tenant and usual landlord positions on lease provisions shows that there are substantial differences. Getting suitable space on appropriate terms is also a key requirement for any business. Ireland will copper-fasten its position as a leading centre for ICT business if it can reduce these differences while increasing available space.

The following table contrasts the key tech tenant requirements with the generally applicable position of landlords.
 

Tech Tenant

Landlord

Term of Lease
Tech start-ups generally require short term leases and/or early break options, as they have the potential to grow exponentially and therefore outgrow the space quickly. 

Term of Lease
Landlords (and their debt funders) require certainty of return on their investment, resulting in a reluctance to provide space on a short term/flexible basis. 

Fit Out
Tech companies provide a holistic offering for their staff and the fit out often includes a gym, canteen and other employee friendly facilities.

 

Fit Out
Landlords generally provide generic shell and core fit out and require full reinstatement to this condition at the end of the lease. This exposes tech tenants to extensive expenditure, both on commencement (fit out) and on termination (reinstatement). 

Access
Tech companies need 24-7-365 access as their service is global and not limited to a couple of time zones or affected by particular national holidays.

 

Access
Such access is only really an issue if the building is multi tenanted. Other tenants may refuse to pay towards out of hours operational costs. The tech tenant may end up having to bear all the cost itself.
 

Security
Tech companies may require their own security and seek to restrict access for the landlord and its agents to certain areas within the premises. They may also require Non-Disclosure Agreements (NDAs) to be signed.

Security
Landlords are often uncomfortable signing an NDA and will want to be able to access the entire property to ensure their investment is being protected and maintained. 
 

Exclusivity
Tech tenants may wish to prevent the letting of other parts of the building to competitors, despite a desire to be located near other tech companies.

Exclusivity
Landlords wish to retain flexibility and will not want any restriction on the tech competitors permitted to occupy other parts of the building.

Flexibility and Informality
Tech tenants often expect their informal approach in business to be reflected in lease documentation. Examples include removing certain standard lease restrictions such as having to obtain the landlord’s consent to minor alterations or to pet animals being on the premises.
 

Flexibility and Informality
Landlords generally require consent to be obtained for all works, and are unlikely to be enthusiastic about pets being brought to the office!



 

Comments

To ensure that the Irish tech sector continues to flourish, we need landlords who know the tech business and are willing to make space available on terms which suit tech tenants.  While the private sector provides some solutions (e.g. Dogpatch Labs and Gravity Centres), the Irish market needs more.  In the past, IDA Ireland has built advance factories, and advance technology buildings for pharma companies to encourage inward investment. Perhaps the IDA could establish a tech office park with incubation space for start-ups and larger areas for companies which have established but not yet gone viral?  This could be run by an investor with suitable finance or by a State agency. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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