Dublin Economic Monitor - Issue 08 | January 2017

Dublin Economic Monitor issue 8

January 2017

In this issue LATEST DUBLIN ECONOMIC DATA IHS MARKIT DUBLIN PMI KBC/ESRI CONSUMER SENTIMENT MIXED SIGNALS FOR ECONOMIC GROWTH IN THE CAPITAL

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PAGE 12

PAGE 14

By Dr. William Hynes, Managing Director, Future Analytics Consulting Limited

By Eoin Doherty Regional Datacentre Director EMEA, Microsoft

DUBLIN REGIONAL ENTERPRISE STRATEGY 2017-2019

SUSTAINABLE DATA CENTRE IN GRANGE CASTLE

WELCOME

HIGHLIGHTS Dublin's unemployment rate dipped slightly to 7.8% in Q3 2016 following an unexpected increase in the second quarter of the year.

Employment levels in Dublin continued to rise, with the most significant expansions in the industry and construction sectors.

Residential rents in Dublin showed mixed signs in Q3 2016 as rents for houses dipped, but rents for apartments rose in the quarter.

Residential property price growth accelerated between July and October 2016 with prices returning to 2009 levels.

Passenger arrivals at Dublin Airport reached a new monthly record of 1.17 million in September 2016.

The Dublin IHS MARKIT PMI data showed a sharpening of growth in business activity in Q4 2016 with particularly strong expansions in the construction and manufacturing sectors.

KBC/ESRI Consumer Sentiment in Dublin weakened significantly in Q4 2016 as perceptions of the current and future economic climate declined.

cover image: bohernabreena reservoir in winter. richard williams.

welcome to the january 2017 issue of the dublin economic monitor

T

he Dublin Economic Monitor is a joint initiative on behalf of the four Dublin Local Authorities, co-ordinated by the City Council. The Dublin Region (four Dublin local authorities combined) plays an increasingly important role in the economy of Ireland and it is important that its performance is properly tracked. The Monitor is designed to be of particular interest to those living and doing business in Dublin or considering locating here. It is produced by DKM Economic Consultants, with KBC/ESRI delivering the Dublin consumer sentiment data and IHS MARKIT delivering the Dublin Purchasing Managers’ Index (PMI).

In this edition we have a special article

by Dr. William Hynes, Managing Director, Future Analytics Consulting Limited, who outlines the three year Dublin Regional Enterprise Strategy 2017-2019. There is also a special article covering Microsoft's revolutionary new Dublin data centre.

You can sign up to our quarterly mailing list and access the Monitor online at www.dublineconomy.ie.

We hope you find the Monitor useful and welcome any feedback to info@leo.dublincity.ie. The next release will be published online on 27th April 2017. Interactive charts from the Monitor are available on the Dublin dashboard www.dublindashboard.ie.

Dublin City Council

Fingal County Council

South Dublin County Council

Dún Laoghaire Rathdown County Council

This document provides general information on the Dublin economy. It is not intended to be used as a basis for any particular course of action or as a substitute for financial advice. The document is produced independently by DKM Economic Consultants; the views and opinions expressed are those of the relevant author, and do not necessarily reflect the views of the Dublin Local Authorities. The Dublin Local Authorities disclaim all liability in connection with any action that may be taken in reliance of this document, and for any error, deficiency, flaw or omission contained in it.

2 //

ECONOMY

GLOBAL ECONOMY

NATIONAL ECONOMY

Following the seismic 2016 political events of ‘Brexit’ in the UK and the election of Donald Trump as President in the US, 2017 will be the year of meaningful action on foot of these results. For the UK, GDP growth projections have been revised downwards to close to 1% in both 2017 and 2018, with these forecasts subject to change as the true nature of Brexit becomes clearer. In the US, growth is projected to strengthen significantly to 2.3% in 2017 and 3% in 2018 as expectations rise regarding expansive economic policies under the new administration. Such expectations of spending increases and household/corporation tax cuts have been significant drivers of the strengthening of the dollar since November (see chart below), along with the Federal Reserve’s stated intention of increasing interest rates a further three times in 2017.

Initial outturns for 2016 suggest that the Irish economy’s performance has remained robust despite the emergence of substantial international volatility. Irish GDP growth looks to have been the highest in the Eurozone for a third consecutive year in 2016, with the core components of domestic demand showing positive trends.

Private consumption is estimated to have expanded by 3.4%, with growth in investment and public consumption expected to have reached 5.6% and 1.2% respectively. Encouragingly, these growth rates are forecasted to be either replicated or exceeded in 2017. exchequer tax receipts performance against profile, 2016 (€million) €800

+11.1% +1.4%

euro: dollar exchange rate

€600

€0.97 €400

€0.96 +39.4%

+0.9%

€200

€0.95 €0.94

€-

€0.93

-9.5%

-€200

€0.92 -€400

€0.91 €0.90

-€600

€0.89

-3.4%

Total

Income Tax

VAT

Corporation Tax

Stamp Duties

Capital Gains

06/01/17

30/12/16

23/12/16

16/12/16

09/12/16

02/12/16

25/11/16

18/11/16

11/11/16

04/11/16

28/10/16

21/10/16

14/10/16

07/10/16

source: department of finance.

€0.88

source: central bank of ireland.

Following a slowdown in 2016, global economic growth is expected to strengthen moderately in 2017 and 2018. The anticipated fiscal expansion in the US is the key source of this projected growth given its spillover effects for other economies, particularly in terms of exports. Amongst the emerging economies, growth is forecasted to be strongest in India where GDP is expected to rise by 7.6% in 2017, and this would contribute towards counteracting the expected slowing growth in the Chinese economy.

Eurozone growth has improved and is forecasted to remain stable through to 2018, but the outcomes of important elections in Germany, The Netherlands and France this year will be strong determinants of the future direction of the currency Union in both economic and political terms. Weak investment and stubbornly high unemployment remain problematic for the Union.

Improvements in Exchequer tax receipts in 2016 have reflected this overall upswing in the Irish economy with stronger than expected returns in Corporation Tax, Capital Gains Tax and Income Tax more than offsetting a shortfall in VAT and Stamp Duties in the year (see graph). This will provide greater fiscal space for the Government over the short- to medium- term.

Weak inflation is a problematic area for the Irish economy, as it is with much of the Eurozone, in spite of the expansive monetary policy being pursued by the ECB. The CPI was mainly flat across 2016 in Ireland and is expected to grow moderately to 0.6% in 2017, but this remains significantly below the ECB’s target inflation rate of 2% per annum for the Eurozone.

The nature and implications of Brexit are still largely unclear, though initial analysis from the ESRI suggests that the Irish economy could shrink by up to 3.8% over the long-term purely on account of the UK’s exit from the EU.

irish macroeconomic growth forecasts

major economies gdp growth forecasts

global uk us euro area germany japan china india source: oecd, november 2016.

2016 %E

2017 %f

2018 %f

2.9 2.0 1.5 1.7 1.7 0.8 6.7 7.4

3.3 1.2 2.3 1.6 1.7 0.9 6.4 7.6

3.6 1.0 3.0 1.7 1.7 1.0 6.1 7.7

gnp gdp private consumption public expenditure investment exports imports unemployment rate cpi inflation debt:gdp ratio* SourCEs: 2016 & 2017: ESrI qEC WINTEr 2016.

2018: DEpArTMENT oF FINANCE, BuDGET 2017.

2016 %E

2017 %f

2018 %f

8.5 4.2 3.4 1.2 5.6 6.4 7.0 8.0 0.0 77.0

3.5 3.5 3.5 1.2 13.4 5.0 7.4 7.0 0.6 73.2

3.2 3.4 2.2 1.3 4.7 4.8 4.8 7.3 N/A 72.7

*general government balance.

// 3

DUBLIN ECONOMY

MIXED SIGNALS FOR ECONOMIC GROWTH IN THE CAPITAL

consumer confidence dips despite improving business and employment indicators The economic fallout from the tumultuous international events of 2016 continues to have direct implications for the Dublin economy, and this trend is likely to continue for the medium term at least.

Mixed economic signals have risen to the fore from a combination of domestic and external factors, and reflect an improving economy which is nevertheless facing challenges on a number of fronts.

The Capital’s labour market, which unexpectedly recorded an increase in its unemployment rate in Q2 2016, remained stable in the third quarter of the year. The unemployment rate dipped slightly QoQ, while employment levels rose by over 3,600 QoQ with strong growth rates in the industrial and construction sectors in particular.

Dublin’s housing market remains in a challenged position, especially in the rental sector. Although growth is slowing overall, rents in Q3 2016 remained at or near peak levels. This will have had a strong influence on the disposable incomes of many Dublin residents — particularly considering the slow pace of new housing supply coming on-stream — which will in turn have affected consumer expenditure. The Government’s recently-introduced ‘rent predictability’ measures are expected to contribute towards reducing average rent growth across the Dublin region over the medium term.

The combination of these domestic and international factors appeared to be having a significant negative bearing on Dublin’s consumer sentiment index in Q4 2016, according to KBC/ESRI. To this end, Austin Hughes, Chief Economist at KBC Bank Ireland states: “Dublin consumer sentiment declined significantly in late 2016 as the mood of consumers in the Capital weakened notably more than that of consumers in the rest of Ireland. In part, the drop in confidence stems from greater nervousness about the general economic outlook because of threats posed by Brexit and potential changes in US policymaking. However, a more influential factor was a downgrade of consumers’ own personal finances that may reflect pressure on living costs in Dublin.”

KBC/ESRI also highlighted that although households, overall,

4 //

continue to pay down debt, the total level of the debt burden remains quite high by international standards, and this could be having an effect on consumers’ expectations, especially when considered in combination with the aforementioned high residential rental costs.

Despite the mixed signals in relation to the labour force and consumers in Dublin, the Capital’s IHS Markit Purchasing Managers’ Index (PMI) for the final quarter of 2016 showed considerable resilience. Andrew Harker, Senior Economist at IHS Markit, explains: “The latest Dublin PMI shows that the local economy continued to perform well during the final quarter of last year. In fact, Q4 saw the sharpest expansion of the year as growth of manufacturing production rebounded strongly following relative weakness during the rest of 2016. There was less positive news from other indices as new orders and employment increased at weaker rates, but crucially both remained in growth territory. The Dublin economy therefore seems well placed at the start of 2017. Dublin firms continued to see output and new orders rise at faster rates than across the Rest of Ireland, but increases outside of Dublin were still robust overall.”

Improving business activity, increased employment levels and a booming tourism sector may be filtering through to the Capital’s public transport system where usage has remained robust at over 49 million trips per quarter for the past year, despite strike action on the Luas and Dublin Bus services in the second and third quarters respectively.

Further positive trends have been sustained at Dublin Airport where the outstanding performance of recent years was maintained, and indeed improved upon, in Q3 2016 with a record level of monthly passenger arrivals recorded in September. The Dublin market for commercial space is currently characterised by high rent levels and low vacancy rates, particularly around the City Centre.

However, new supply is coming on stream and will be expected to alleviate pressure over the short- to medium- term.

DUBLIN ECONOMIC INDICATORS

DUBLIN ECONOMIC INDICATORS dublin unemployment stable in q3 2016 dublin unemployment (sa) year on year change % points (sa) dublin employment '000s (sa) year on year change '000s (sa)

dublin & national unemployment rate % (sa) 16%

q3 ' 16 7.8% +0.1 618.9 +16.3

National Max 15.1%

14%

Dublin Max 13.6%

12% 10% 8%

source: cso qnhs seasonally adjusted.

6% 4%

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q3 11

Q1 12

Q1 11

Q3 10

Q1 10

Q3 09

Q1 09

Dublin

National

source: cso qnhs. dublin seasonally adjusted by dkm.

employment levels continue to climb

employment by broad sector '000s (sa) 700

services employment '000s (sa) year on year change '000s (sa) industry & constr, employment '000s (sa) year on year change '000s (sa)

Q3 08

0%

Q1 08

2%

Q3 07

Dublin’s seasonally adjusted unemployment rate remained broadly stable in Q3 2016, having unexpectedly increased by 1 percentage point in the previous quarter. Employment in the capital was also largely stable QoQ at almost 619,000 jobs.

The unemployment rate in Dublin is now almost in line with the national equivalent. Such a scenario has not arisen since the latter stages of the boom and is an indication of the improving economic environment outside Dublin.

q3 ' 16 525.2 +0.5 88.7 +15.4

source: cso qnhs, seasonally adjusted BY DKM.

Employment levels remained buoyant in three of the four main sectors of the Dublin economy in Q3 2016. Employment increased most robustly within industry and construction with an increase of over 15,000 YoY. Private sector services also recorded strong increases with employment rising by 3,900 or 1.1% YoY. Public sector employment was stable in the quarter but it was the only sector to record a YoY decline with a 1.2% reduction compared to the same quarter in 2015.

Max: 636,900

615,400

600 500 400 300 200 100 0

Q3 07

Q3 08

Q3 09

Q3 10

Private Sector Services

Q3 11

Q3 12

Public Sector

Q3 13 Industry

Q3 14

Q3 15

Q3 16

Construction

source: cso qnhs seasonally adjusted. note: individual sector values may not sum to total due to rounding.

// 5

DUBLIN ECONOMIC INDICATORS employment in services '000s (SA)

growth rate of services employment slows private sector services employment '000s (SA)

year on year change '000s (SA) public sector services employment '000s (SA)

year on year change '000s (SA)

600

q3 '16 373.7 +3.9 153.1 -1.9

Max: 526,800

500

400

300

source: cso qnhs. seasonally adjusted by dkm.

200

The rate of employment growth within the Dublin services sector fell back in Q3 2016 as expansions and contractions affected 100 different segments of the sector. Robust YoY growth was recorded in Transportation and Storage (+18.4%), Accommodation and Food 0 (+10.4%), Public Administration (+7%) and Financial/Insurance (+6.1%). This was largely offset by ‘Other’ services (-10%), Wholesale and Retail Trade (-6.2%) and Education (-4%).

Overall services employment thus rose by just 0.4% YoY.

Q3 07

Q3 08

Q3 09

Q3 10

Q3 11

Q3 12

Q3 13

Q3 14

Q3 15

Q3 16

Health

Education

Public Admin

Wholesale & Retail

Prof/ Scientific/ Tech

Financial/ Insurance

Transport & Storage

Accommodation & Food

ICT

Other source: cso qnhs. seasonally adjusted by dkm. note: individual sector values may not sum to total due to rounding.

property price growth continues in dublin

140

mixed developments in residential rents

80 70 60

Dublin

Oct 16

Feb 16

Jun 15

Oct 14

Feb 14

Jun 13

Oct 12

Feb 12

Jun 11

Oct 10

Feb 10

40

Jun 09

50

National Excl Dublin

source: cso.

residential rents € per month €1,500

Dublin Apt Max: €1,397

€1,300 €1,200 €1,100 €1,000 €900 €800 €700

Dublin House source: rtb.

Dublin Apt

National ex Dublin House

National ex Dublin Apt

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q1 12

Q3 11

Q1 11

Q3 10

€500

Q1 10

€600 Q3 09

There were mixed developments in residential rents in Q3 2016, as the YoY increase in rents for Dublin houses moderated to 3.3% from 6.8% in Q2. However, growth in apartment rents in Dublin remained high, registering a YoY increase of 9.6%. Rents for houses in Dublin declined QoQ for the first time since Q1 2013. The Government’s ‘rent predictability’ measures will serve to moderate rent increases in designated rent pressure zones, including Dublin, but are unlikely to impact on the growth in rental levels outside those areas.

Dublin House Max: €1,487

€1,400

Q1 09

q3 ' 16 1,478 +47 1,397 +122

source: rtb.

6 //

90

Q3 08

dublin house rent € per month year on year change € dublin apartment rent € per month year on year change €

110 100

Oct 08

Residential property prices continued to increase in Dublin on a YoY basis between July and October 2016. The index for property prices reached 90.9 in October, 5.5% above the same month in 2015, and the highest index level recorded since April 2009. The corresponding rate of price growth outside the Capital was almost twice as high (+10.2%); prices have been increasing at a faster rate outside the capital for the past 17 months.

120

Feb 08

source: cso. note: this index now includes both cash- and mortgage-based transactions.

Dublin Max 133.7

130

Jun 07

oct ' 16 90.9 +5.5 81.3 +10.2

Q1 08

property price index dublin year on year % change property price index national excl dublin year on year % change

residential property price index (2005 = 100)

DUBLIN ECONOMIC INDICATORS

office rents flat in q4 2016 city centre office rent index year on year % change south suburbS office rent index year on year % change

dublin office rents index (2006 = 100) 120

q4 '16 109.0 +9.0 110.0 0.0

City Centre Max = 113.7 South Suburbs Max = 110

110 100 90 80

source: CBRE

70 60

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

Q4 11

City Centre

Q2 12

Q2 11

Q4 10

Q2 10

Q4 09

Q2 09

Q4 08

Q2 08

Q4 07

40

Q2 07

50

Q4 06

Office rents across Dublin were stable in the final quarter of 2016. Rents in the City Centre remained at 109 on the rent index, and had increased by 9% YoY. In the South Suburbs, office rents have been stable at 110 on the index since Q2 2015.

Growth in office rents has moderated in all areas of Dublin on both a QoQ and YoY basis in recent quarters, and is significantly weaker than the sharp rent increases recorded in 2014 and 2015.

South Suburbs

source: cbre.

further declines in office vacancies in q4 vacancy rate % dublin 2/4 year on year change % points vacancy rate % dublin suburbs year on year change % points

dublin office space vacancy rates % 30%

q4 '16 4.7 -1.3 9.8 -2.9

Dublin Suburbs Max = 25% Dublin 2/4 Max = 20.6%

25% 20% 15%

source: cbre.

public transport usage remains strong in q3 2016 public transport million trips (sa) year on year change (sa)

q3 '16 49.9 +1.8

source: nta seasonally adjusted by dkm.

10%

Dublin 2/4

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

Q2 12

Q4 11

Q2 11

Q4 10

Q2 10

Q4 09

Q2 09

Q4 08

0%

Q2 08

5%

Q4 07

Office vacancy rates continued to decline in Dublin in Q4 2016, with vacancies in the Dublin Suburbs reaching the lowest point in the series to date. The office vacancy rate for the Suburbs fell by 1 percentage point (pp) QoQ and by 2.9pp YoY to stand at 9.8% at the end of Q4. This is the first time in the series that the rate has fallen below 10%. In Dublin 2/4, the vacancy rate declined by 0.6pp QoQ and 1.3pp YoY to reach 4.7% in the quarter.

Dublin Suburbs

source: cbre.

public transport million trips (sa) 52 51 50 49 48 47 46 45 44

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q1 12

Q3 11

42

Q1 11

43 Q3 10

Usage of Dublin's public transport system remained stable in the third quarter of 2016 with approximately 50 million passenger trips (seasonally adjusted). This represented a minor decrease QoQ which was likely to have been the result of strike action on the Dublin Bus service in September. Despite the QoQ decline, passenger trips on public transport were 1.8 million or 3.7% above the same quarter in 2015 with the strongest YoY growth recorded on the Irish Rail and Luas services.

source: nta. seasonally adjusted by dkm.

// 7

DUBLIN ECONOMIC INDICATORS passenger growth strengthens at dublin airport total arrivals '000s (SA) year on year change '000s (sa)

sep '16 1,171.9 +121.3

dublin airport arrivals '000s (sa) 1,200

Max: 1,172

1,100 1,000

source: cso, seasonally adjusted by dkm.

900 800 700 Severe Winter Weather

Sep 16

Nov 15

Jan 15

Mar 14

May 13

Jul 12

Sep 11

Jan 10

Mar 09

May 08

500

Nov 10

Icelandic Ash Cloud

600

Jul 07

Passenger arrivals at Dublin Airport returned to double-digit YoY growth in September 2016. Over 1.17 million passengers (seasonally adjusted) arrived at the airport in the month, setting a new monthly record. This was 11.6% or 121,300 passengers above the equivalent for September 2015. Passenger arrivals have now increased on a YoY basis in every month since the summer of 2012.

source: cso. seasonally adjusted by dkm.

low house completion rate persists

2,000

oct '16 387 +83

source: declg. seasonally adjusted by dkm.

Max: 1,900

1,800 1,600 1,400 1,200 1,000 800 600 400

Oct 16

Jan 16

Apr 15

Jul 14

Oct 13

Jan 13

Apr 12

Jul 11

Oct 10

Jan 10

Apr 09

Jul 08

0

Oct 07

200 Jan 07

Supply to the Dublin housing market continued at a low level in September and October 2016 with fewer than 400 housing completions (seasonally adjusted) delivered in each month. There were less that 3,500 housing completions across the four Dublin local authority areas in the first three quarters of the year. This represents an increase of over 1,000 units on the same period in 2015. There were initial signs of increased commencements in the Dublin market in October which will provide much-needed supply going forward.

Apr 06

total housing completions (sa) year on year change (sa)

dublin housing completions (sa)

source: declg. seasonally adjusted by dkm.

dublin port throughput remains stable

dublin port tonnage million tonnes (sa) 9.0 Max: 8.7 million tonnes

8.5

7.0 6.5 Min: 6.3 million tonnes

6.0

source: dublin port. seasonally adjusted by dkm.

8 //

Q3 16

Q3 15

Q3 14

Q3 13

Q3 12

5.0

Q3 11

5.5

Q3 10

Activity levels at Dublin Port remained largely stable QoQ in Q3 2016 with a seasonally adjusted total of 8.7 million tonnes of cargo handled in the quarter. Despite low quarterly growth, this total represented a robust YoY increase of 400,000 tonnes or 5.3%. Growth at the port has been relatively flat across 2016 compared to the very strong year in 2015. Brexit may have further implications to this end as trade between Ireland and the UK is affected, most notably for port trade on the Irish export side.

7.5

Q3 09

source: dublin port. seasonally adjusted by dkm.

8.0

Q3 08

yoy change million tonnes (sa)

q3 '16 8.7 +0.4

Q3 07

dublin port million tonnes (sa)

DUBLIN’S INTERNATIONAL RANKINGS

DUBLIN CONTINUES TO RANK HIGHLY ON INTERNATIONAL BENCHMARKS

Internationally published benchmarks are a useful means of measuring a city’s performance relative to its peers, and recent indicators for Dublin confirm the city’s strong showing across a range of dimensions (see table below).

The benchmarks listed focus on a number of areas – attractiveness for FDI, the real estate market, quality and cost of living, business environment, university quality, start-up environment and tourism.

The FDI Global Cities of the Future ranking for 2016/2017 lists Dublin as the third best city in the world for attracting FDI. The city performed particularly strongly in the sub- categories of business friendliness and economic potential (both 3rd ranking).

The authors of the report highlighted how Dublin is going from “strength to strength as a hub for software and IT FDI”, noting that the sector accounted for over 45 per

cent of all of Dublin’s FDI between 2011 and 2015.

Dublin city also improved its ranking in The Reputation Agency’s City Reptrak Study, which focuses on a city’s reputation as a destination to visit, work, live and invest.

Dublin rose two places to its highest ever ranking of 20th worldwide.

The Capital ranked highly in the first Global Talent Competitiveness Index which assesses cities on their ability to grow, attract and retain talent. Dublin was ranked as the tenth best city from a group of 46 leading international cities worldwide, with a particularly strong performance in ‘enabling’ talent due to the high levels of internet access in the city and the presence of many Forbes Global 2000 companies.

Dublin rated highly in both the 2016 CBRE European Tech Rankings (6th) and the 2016 European Digital City Index (8th).

The city’s high ranking out of 60 cities in the latter was largely due to its strengths in entrepreneurial culture (2nd) and mentoring and managerial assistance (1st) but the city was lagging behind in digital infrastructure (50th) and the related sub- categories of cost of broadband (60th) and availability of fibre internet (48th).

Dublin also retained its position as one of Europe’s most attractive cities for property development and investment in the 2017 PwC Emerging Trends in Real Estate report.

Joanne Kelly of PwC noted: “With an economy performing well over the average EU GDP level, a young fastgrowing population, the most business friendly tax regime in Europe and many multinationals based here, Dublin remains a highly regarded location.”

d u b l i n ' s l at e s t i n t e r n at i o n a l r a n k i n g s SOURCE FDI Intelligence Global Cities of the Future Global Financial Centres Index (GFCI) PwC Financial Services Attractiveness Indicator

BENCHMARK CRITERIA Socio-economic Business environment, financial sector development, infrastructure, human capital, reputational & general factors; online survey Connectivity, law, business environment, people, critical mass, financial infrastructure

YEAR

RANKING CHANGE‡

2017

3

-

2017

31

▲

2016

2

-

PwC Emerging Trends in Real Estate Europe 2017

Real estate investment, development

2017

4

JLL City Momentum Index

Real Estate

2016

3

▼ ▲

IMD World Competitiveness Yearbook Rankings (Ireland)

Economic performance, government efficiency, business efficiency & infrastructure

2016

7

▲

Global Talent Competitiveness Index

Ability to grow, attract and retain talent

2017

10

Mercer 2016 Quality of Living Survey

Environmental/socio-economic

2016

33

QS World University Rankings

University quality

2016/17

98*

Knight Frank Global Cities Report

Property costs for start-ups in tech cities

2017

6

▲ ▼ -

CBRE European Tech Ranking

Tech clusters’ employment, growth and attractiveness credentials

2016

6

-

European Digital City Index

Key themes for a startup hub

2016

8

-

City Reptrak Study

Reputation as a destination to visit, work, live and invest

2016

20

▲

* tcd.

‡change on previous publication of the relevant benchmark. an upward-pointing arrow denotes an improvement.

// 9

KBC / ESRI CONSUMER SENTIMENT INDEX dublin consumer sentiment weakens further in q4

perceptions of current conditions decrease sharply current conditions q4 2016 year on year change quarter on quarter change

120 100 80

Dublin

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

Q2 12

Q4 11

40

Q2 11

60

Q4 10

The Consumer Sentiment Index for Dublin weakened further in Q4 2016 largely due to declining expectations for the economy next year and weakened perceptions of the current economic climate. The index fell by 12.3 points QoQ; the largest quarterly fall since Q4 2012. Outside Dublin a less severe decline of 2.7 points was recorded in Q4. Consumer Sentiment fell at a faster rate in the Capital for much of 2016. This could reflect a greater sensitivity in Dublin to developments such as Brexit and the US election which present risks to the Irish economy.

140

Q2 10

151.5 -9.1 -2.7

Q4 09

137.8 -14.8 -12.3

160

Q2 09

dublin

Q4 08

q4 2016 year on year change quarter on quarter change

180

National excl. dublin

Q2 08

consumer sentiment

Dublin sentiment overall Base 2003 = 100

National excl. Dublin

Dublin current conditions 130

dublin

National excl. dublin

104.3 +2.0 -11.0

121.7 +3.1 -5.3

Base 2003 = 100

120 110 100 90 80

consumer expectations continue to trend down

Dublin

230

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

National excl. Dublin

210 190 170 150 130 110 90 70

Dublin

About

The KBC/ESRI sentiment index is based on responses from consumers about general economic conditions and their household finances. A more detailed commentary is available at www.kbc.ie/blog

National excl. Dublin

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

Q2 12

Q4 11

Q2 11

Q4 10

30

Q2 10

50 Q4 09

180.0 -20.7 -0.2

Base 2003 = 100

Q2 09

National

Consumer expectations in Dublin noticeably worsened across 2016, despite the improvement in the Irish economy. In Q4 2016, the Dublin index fell by 13.8 points QoQ to 174.1. This decline was driven by an increasing number of respondents having a less positive view of economic activity as well as a more negative view of the labour market. Such responses are likely being driven by international developments, such as the increased likelihood of protectionist US trade policies, rather than by domestic risks.

10 //

Q2 12

Q4 11

Q2 11

Q4 10

Q2 10

Q4 09

Q2 09

Q4 08

40

Dublin expectationS

dublin excl. dublin 174.1 -33.1 -13.8

50

Q4 08

q4 2016 year on year change quarter on quarter change

60

Q2 08

consumer expectations

70

Q2 08

The Dublin Index of Current Conditions fell sharply QoQ to 104.3 in Q4 2016, down from 115.2 in Q3. The equivalent Index outside of Dublin also declined, falling by 5.3 index points to 121.7. In Q4 2016, a higher proportion of Dublin consumers viewed their current financial situation as worse than last year. This could be a reflection of the increasing rent levels in Dublin, or households’ debt burdens, which remain at a high level by international standards.

DUBLIN IHS MARKIT PMI growth of business output in dublin accelerates in q4

overall ihs markit pmi (sa) 65

dublin

national excl. dublin

60

q4 2016

59.8

55.9

55

year on year change

-0.4 +1.7

-3.1 -1.7

50

overall ihs markit pmi

quarter on quarter change

increasing rate of growth ▲

50 = no change

45

new orders rise sharply, albeit at reduced pace

40 35 30

Q4 16

Q3 15

Q2 14

Q1 13

Q4 11

Q3 10

Q2 09

Q4 06

Q3 05

Q1 08

National excl. Dublin

overall pmi new orders (sa) 65

national excl. dublin

60

q4 2016

57.4

56.2

55

year on year change

-2.4 -1.0

-3.6 +0.2

50

quarter on quarter change

Q2 04

Dublin

dublin

new orders

increasing rate of contraction ▼ Q1 03

25

Q4 01

The rate of growth in business activity in Dublin continued to quicken in Q4 2016. The Dublin PMI rose 1.7 index points QoQ, signalling a substantial increase in output that was the strongest for a year. The rate of expansion for the Rest of Ireland eased for the third quarter running to the weakest since Q1 2014. The strongest expansion in Dublin was again in the construction sector, while the growth rate in manufacturing also quickened markedly. Services posted the weakest rise of the three sectors, but the expansion in activity was still positive.

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

dublin

national excl. dublin

60

q4 2016

54.2

57.5

55

year on year change

-4.7 -3.9

+1.0 +2.4

50

quarter on quarter change

Q4 16

Q4 15

Q4 14

Q4 13

Q4 11

Q4 12

Dublin

overall pmi employment growth (sa) 65

employment growth

Q4 10

National excl. Dublin Rest of Ireland

weaker rise in staffing levels

Q4 09

Q4 08

Q4 07

Q4 06

Q4 05

Q4 04

Q4 03

increasing rate of contraction ▼ Q4 02

25

Q4 01

Although continuing to rise during Q4 2016, the rate of expansion in new orders eased from that seen in Q3. In fact, the latest increase in new business was the slowest since Q2 2013. Despite seeing a slowdown in the pace of growth, Dublin continued to register a faster increase in new orders than the rest of Ireland, where the expansion was broadly in line with that seen in Q3.

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

Q4 16

Q4 15

Q4 14

Q4 13

Q4 12

Q4 11

Q4 10

Q4 09

Q4 08

Q4 07

Q4 06

Q4 05

Q4 04

Q4 03

increasing rate of contraction ▼ Q4 02

25

Q4 01

With workloads continuing to rise, companies in Dublin increased their staffing levels in the final three months of 2016.

That said, the rate of job creation eased markedly from that seen in Q3 and was the weakest in more than three years. The rest of Ireland, meanwhile, posted a sharp and accelerated increase in employment in Q4, with the rise in staffing levels faster than that seen in Dublin.

National excl. Dublin

about

The Dublin Purchasing Managers’ Index® (PMI) series is produced by IHS Markit Economics, an independent research company that produces highly-regarded surveys of business conditions in nations around the world www.markit.com // 11

SPECIAL REPORT

the dublin regional enterprise strategy 2017-2019

BY DR. WILLIAM HYNES MANAGING DIRECTOR, FUTURE ANALYTICS CONSULTING LIMITED The Dublin regional Enterprise Strategy, developed by the four local authorities of the Dublin region, provides a coherent and coordinated approach to promoting enterprise, employment and entrepreneurial activities in the Dublin region for the period 2017-2019.

A review of existing and emerging policy was the framework for the development of the strategy. This mapped policy initiatives including the Dublin Regional Action Plan for Jobs 2016-2018 and Local Economic and Community Plans 2016-2021 in Dublin while also recognising changing economic conditions and technological advances.

The focus areas include understanding the ‘key sectors’ namely, Administration; Professional Services; Tourism and Leisure; Education and Training; Manufacturing and Industry; Transport and Logistics; Construction; ICT and Technology, and Retail and Wholesale and their associated employment levels, together with the clustering of activity and supports across the region. This clustering of enterprises in key locations has been mapped below and indicates where activity is concentrated in the Dublin region. In addition, stakeholder consultations allowed for key insights to be incorporated into the strategy’s development and overall future direction.

primary enterprise clusters dublin region, 2016

The recent improvements in the national economy have been heavily driven by the Dublin regional economy. The number of enterprises in Dublin is 10% higher now than in 2008 and an associated reduction in the unemployment rate in the region illustrates an increasingly entrepreneurial economy and reflects the establishment of many new start-ups.

Within this context, identified ‘growth opportunity areas’ have significant potential for consolidation and expansion in the future. These are centred on the following: Design and Creative Industries; The Food Industry; The Green Economy (CleanTech and Environment); International Financial Services; Pharma/ BioPharma; Software and Digital; Tourism, and Education and Training.

Recognising the existing landscape, and the policy and economic conditions that shape it, it is paramount that a future ‘enterprise vision’ for the Dublin Region be articulated.

“

The vision of this strategy is the creation of a sustainable, globally competitive and innovative destination for enterprise development and living.

”

12 //

These key objectives have resulted in the establishment of focussed ‘enterprise recommendations’, that will ensure the roll-out of specific regional and local ‘enterprise actions’, 20 in total. These ‘actions’ will be delivered locally and collaboratively by the Dublin Local Authorities through Local Enterprise Offices and with key partners. They will include developing an ‘enterprise brand’, incentivising the uptake of vacant and underutilised enterprise space, promoting the growth and investment opportunities within the ‘Strategic Development Zones’, coordinating the streamlining of training courses, and investigating opportunities for collaboration with the aim of promoting and facilitating social enterprises and innovation. The implementation of all the actions is crucial to secure the overall successful delivery of this threeyear enterprise strategy for the Region, through an integrated, collaborative and strategic approach. This will result in increasing employment moving towards the Dublin Regional Action Plan for Jobs: 2016-2018 targets.

this vision will be delivered via key enterprise objectives covering: • Development of the enterprise proposition for the Dublin Region, with an international focus to attract FDI and a highly skilled and talented workforce; • Delivery of a high-quality, efficient, responsive and supportive environment for all businesses in the Region; • Promote and foster enterprise in the identified ‘growth opportunity areas’, and to entice FDI to Ireland; • Encourage and facilitate targeted educational and training initiatives to meet the current and emerging future needs of enterprise; and • Promotion of a culture of entrepreneurship and innovation across the wider community through supports, awareness, marketing and branding initiatives.

number of people in employment (actual and targeted) dublin region, 2000-2020

// 13

SPECIAL REPORT

Sustainable Data Centre Development in Grange Castle EOIN DOHERTY REGIONAL DATACENTRE DIRECTOR , EMEA, MICROSOFT.

Microsoft continue to work with South Dublin County Council on the development of their sustainable data centre in Grange Castle Business Park.

Ireland is a strategic location for Microsoft globally, with a 1,200-strong team working across European Middle East and Africa Operations, European Data Centre, European Development and Engineering Centre, and Ireland Sales Organisation. The company has been investing and located in Ireland for over 30 years.

Grange Castle in Dublin was selected as the location of the company’s first data centre built outside the US, with the initial development phase opening in 2009. It has expanded on a number of occasions since opening due to the continued and growing demand for Microsoft’s cloud services across the European region making Ireland an important cloud hub for Microsoft.

Through the expanded datacentres, the Microsoft Cloud provides customers with increased opportunities for innovation and helps drive the digital transformation of businesses to enable growth for local economies.

The advantages of locating the data centre in Ireland include proximity to cloud services customers, geological stability, extensive fibre optic networks, reliable and affordable energy rates and a moderate cool climate that enables free air cooling of the facility.

Sustainability is a key consideration for Microsoft. Grange Castle Dublin was the first location where Microsoft employed outside air and direct evaporative cooling systems at scale – a practice that has since become common across most of its global datacentre fleet.

Microsoft is committed to datacentre efficiency and these cooling technologies significantly reduce the energy and water needed for datacentre cooling processes. Microsoft’s investments in datacentre R&D have resulted in facilities that are much more efficient than traditional datacentres, capable of Power Usage Efficiencies (PUEs) as low as 1.13 compared to industry averages.

Microsoft continues to actively invest in Ireland. The company is currently in the process of constructing a state of the art campus in South County Business Park, Leopardstown, representing an investment of €134m.

14 //

grange castle business park Grange Castle Business Park is a South Dublin County Council owned Business Park of approximately 500 acres, situated 10km west of Dublin City and 3km west of the M50. It is bounded on the north by the Grand Canal, on the east by the Outer Ring Road, and to the south and west are the Nangor Road and Lucan/Newcastle Road.

Grange Castle Business Park prides itself on excellent connectivity to all major services, especially fibre, , water and drainage as well as proximity to the wider major road network, residential opportunities and amenities. The Park is fully developed with all the necessary infrastructure and services to cater for the requirements of major national and international clients.

The Council in conjunction with IDA Ireland has attracted blue-chip multinational companies such as Pfizer, Takeda, Microsoft, Interxion, Grifols and Aryzta to the Park. Each client operates within a high quality site with access to all infrastructural services.

Grange Castle Facilities Management Ltd, a company owned by South Dublin County Council, manages the business park infrastructure and client relationships as well as overseeing the operations and maintenance of the park which includes security and landscaping contracts.

Additional lands have recently been acquired that allow for the potential significant expansion of the Park in the longer term pending appropriate approvals. www.grangecastle.ie

ECONOMIC SCORECARD

dublin: economic scorecard january 2017 Note: These "petrol gauge" charts present the performance of the particular indicator relative to a range of performances from most positive (green) to least positive (red). Each gauge presents the latest value compared to the peak value and the trough value over the last decade (except for public transport trips which cover the past 5 years). The Commercial Property gauges are red at the high and low extremes, in recognition of the undesirability of rents that are either too high or too low as well as vacancy rates. .

economy

ihs markit business pmi q4 2016

46

8

51

40

63

kbc/esri consumer sentiment q4 2016

10

6

57

59.8

34

unemployment rate q3 2016

100 12

70

7.8

4

3 month moving average (sa)

120

14

% (sa)

140

138

53

160

index (2003 = 100) (sa)

transport airport arrivals sept 2016

830

7.3

950

720

1,060

1,172

610

seaport cargo q3 2016

'000s/month (sa)

46.0

7.7

6.8

8.2

8.7

6.3

public transport trips q3 2016

44.4

42.7

million tonnes/quarter (sa)

47.7 49.3

49.9

51.0

million trips/quarter (sa)

residential property average residential rents q3 2016

1,130

87

1,220

1,050

971

residential property price index oct 2016

1,300

1,375 â‚Ź/month

800

103

71

55

housing completions oct 2016

119

90.9

135

index 2005 = 100

1,200

400

1,500

387

60

1,910

units/month (sa)

commercial property dublin city centre office rent q4 2016

450

520

645 â‚Ź/sq.m.

673

9

4

dublin suburbs office vacancy rate q4 2016

20

15

600

370

296

dublin 2/4 office vacancy rate q4 2016

%

22

13

25

4.7

19

16

30

9.8

25

%

sources: cso, except consumer sentiment kbc/esri; IHS markit; seaport cargo dublin port; public transport nta; residential rents rtb; commercial property cbre research

// 15