Dublin Economic Monitor

Transcription

1 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 F E A T U R I N G PAGE 12 DUBLIN REGIONAL ENTERPRISE STRATEGY By Dr. William Hynes, Managing Director, Future Analytics Consulting Limited PAGE 14 SUSTAINABLE DATA CENTRE IN GRANGE CASTLE By Eoin Doherty Regional Datacentre Director EMEA, Microsoft

2 WELCOME HIGHLIGHTS Dublin's unemployment rate dipped slightly to 7.8% in Q 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 Q 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 The Dublin IHS MARKIT PMI data showed a sharpening of growth in business activity in Q with particularly strong expansions in the construction and manufacturing sectors. KBC/ESRI Consumer Sentiment in Dublin weakened significantly in Q as perceptions of the current and future economic climate declined. welcome to the january 2017 issue of the dublin economic monitor The 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 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 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 Interactive charts from the Monitor are available on the Dublin dashboard cover image: bohernabreena reservoir in winter. richard williams. Dublin City Council South Dublin County Council Fingal 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 //

3 ECONOMY GLOBAL 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 NATIONAL ECONOMY 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 exchequer tax receipts performance against profile, 2016 ( million) % euro: dollar exchange rate % % % % % Total Income Tax VAT Corporation Tax Stamp Duties Capital Gains source: department of finance /10/16 14/10/16 21/10/16 28/10/16 04/11/16 source: central bank of ireland. 11/11/16 18/11/16 Following a slowdown in 2016, global economic growth is expected to strengthen moderately in 2017 and 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. 25/11/16 02/12/16 09/12/16 16/12/16 23/12/16 30/12/16 06/01/17 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 2016 % E 2017 % f 2018 % f 2016 % E 2017 % f 2018 % f global uk us euro area germany japan china india source: oecd, november gnp gdp private consumption public expenditure investment exports imports unemployment rate cpi inflation N/A debt:gdp ratio* SourCEs: 2016 & 2017: ESrI qec WINTEr : DEpArTMENT of FINANCE, BuDGET *general government balance. // 3

4 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 Q 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, 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 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 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 Q 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. 4 //

5 DUBLIN ECONOMIC INDICATORS DUBLIN ECONOMIC INDICATORS dublin unemployment stable in q q3 '16 dublin unemployment (sa) 7.8% year on year change % points (sa) +0.1 dublin employment '000s (sa) year on year change '000s (sa) source: cso qnhs seasonally adjusted. 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. dublin & national unemployment rate % (sa) 16% National Max 15.1% 14% Dublin Max 13.6% 12% 10% 8% 6% 4% 2% 0% Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Dublin National source: cso qnhs. dublin seasonally adjusted by dkm. employment levels continue to climb q3 '16 services employment '000s (sa) year on year change '000s (sa) +0.5 industry & constr, employment '000s (sa) 88.7 year on year change '000s (sa) source: cso qnhs, seasonally adjusted BY DKM Max: 636,900 employment by broad sector '000s (sa) 615,400 Employment levels remained buoyant in three of the four main sectors of the Dublin economy in Q 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 Q3 07 Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 13 Q3 14 Q3 15 Q3 16 Private Sector Services Public Sector Industry Construction source: cso qnhs seasonally adjusted. note: individual sector values may not sum to total due to rounding. // 5

6 DUBLIN ECONOMIC INDICATORS growth rate of services employment slows q3 '16 private sector services employment '000s (SA) year on year change '000s (SA) +3.9 public sector services employment '000s (SA) year on year change '000s (SA) -1.9 source: cso qnhs. seasonally adjusted by dkm. The rate of employment growth within the Dublin services sector fell back in Q as expansions and contractions affected different segments of the sector. Robust YoY growth was recorded in Transportation and Storage (+18.4%), Accommodation and Food (+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 employment in services '000s (SA) Max: 526,800 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 oct '16 property price index dublin 90.9 year on year % change +5.5 property price index national excl dublin 81.3 year on year % change source: cso. note: this index now includes both cash- and mortgage-based transactions. Residential property prices continued to increase in Dublin on a YoY basis between July and October 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 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. 140 Dublin Max residential property price index (2005 = 100) Jun 07 Feb 08 Oct 08 Jun 09 Feb 10 Oct 10 Jun 11 Feb 12 Oct 12 Jun 13 Feb 14 Oct 14 Jun 15 Feb 16 Oct 16 Dublin National Excl Dublin source: cso. mixed developments in residential rents q3 '16 dublin house rent per month 1,478 year on year change +47 dublin apartment rent per month 1,397 year on year change +122 source: rtb. 1,500 1,400 1,300 1,200 1,100 1, residential rents per month Dublin House Max: 1,487 Dublin Apt Max: 1,397 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 Q 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 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Dublin House source: rtb. Q3 10 Q1 11 Q3 11 Q1 12 Dublin Apt Q3 12 Q1 13 Q3 13 National ex Dublin House Q1 14 Q3 14 Q1 15 Q3 15 National ex Dublin Apt Q1 16 Q //

7 DUBLIN ECONOMIC INDICATORS office rents flat in q q4 '16 city centre office rent index year on year % change +9.0 south suburbs office rent index year on year % change 0.0 source: CBRE Office rents across Dublin were stable in the final quarter of 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 Q 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 City Centre Max = South Suburbs Max = dublin office rents index (2006 = 100) Q4 06 Q2 07 Q4 07 Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 City Centre South Suburbs source: cbre. further declines in office vacancies in q4 q4 '16 vacancy rate % dublin 2/4 4.7 year on year change % points -1.3 vacancy rate % dublin suburbs 9.8 year on year change % points -2.9 source: cbre. 30% 25% 20% 15% dublin office space vacancy rates % Dublin Suburbs Max = 25% Dublin 2/4 Max = 20.6% 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. 10% 5% 0% Q4 07 Q2 08 Q4 08 Q2 09 source: cbre. Q4 09 Q2 10 Q4 10 Q2 11 Dublin 2/4 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Dublin Suburbs Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 public transport usage remains strong in q q3 '16 public transport million trips (sa) 49.9 year on year change (sa) +1.8 source: nta seasonally adjusted by dkm public transport million trips (sa) 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 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 source: nta. seasonally adjusted by dkm. // 7

8 DUBLIN ECONOMIC INDICATORS passenger growth strengthens at dublin airport sep '16 total arrivals '000s (SA) 1,171.9 year on year change '000s (sa) ,200 1,100 1,000 dublin airport arrivals '000s (sa) Max: 1,172 source: cso, seasonally adjusted by dkm. Passenger arrivals at Dublin Airport returned to double-digit YoY growth in September 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 Passenger arrivals have now increased on a YoY basis in every month since the summer of Jul 07 May 08 Mar 09 Jan 10 Severe Winter Weather Icelandic Ash Cloud Nov 10 Sep 11 Jul 12 May 13 Mar 14 Jan 15 Nov 15 Sep 16 source: cso. seasonally adjusted by dkm. low house completion rate persists oct '16 total housing completions (sa) 387 year on year change (sa) +83 2,000 1,800 1,600 1,400 dublin housing completions (sa) Max: 1,900 source: declg. seasonally adjusted by dkm. 1,200 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 There were initial signs of increased commencements in the Dublin market in October which will provide much-needed supply going forward. 1, Apr 06 Jan 07 Oct 07 Jul 08 Apr 09 Jan 10 Oct 10 Jul 11 Apr 12 Jan 13 Oct 13 Jul 14 Apr 15 Jan 16 Oct 16 source: declg. seasonally adjusted by dkm. dublin port throughput remains stable q3 '16 dublin port million tonnes (sa) 8.7 yoy change million tonnes (sa) +0.4 source: dublin port. seasonally adjusted by dkm. Activity levels at Dublin Port remained largely stable QoQ in Q 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 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. dublin port tonnage million tonnes (sa) 9.0 Max: 8.7 million tonnes Min: 6.3 million tonnes Q3 07 Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 13 Q3 14 Q3 15 Q3 16 source: dublin port. seasonally adjusted by dkm. 8 //

9 DUBLIN CONTINUES TO RANK HIGHLY ON INTERNATIONAL BENCHMARKS DUBLIN S INTERNATIONAL RANKINGS 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 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. dublin's latest international rankings SOURCE BENCHMARK CRITERIA YEAR RANKING CHANGE FDI Intelligence Global Cities of the Future Socio-economic Global Financial Centres Index (GFCI) PwC Financial Services Attractiveness Indicator Business environment, financial sector development, infrastructure, human capital, reputational & general factors; online survey Connectivity, law, business environment, people, critical mass, financial infrastructure * tcd. change on previous publication of the relevant benchmark. an upward-pointing arrow denotes an improvement PwC Emerging Trends in Real Estate Europe 2017 Real estate investment, development JLL City Momentum Index Real Estate IMD World Competitiveness Yearbook Rankings (Ireland) Economic performance, government efficiency, business efficiency & infrastructure Global Talent Competitiveness Index Ability to grow, attract and retain talent Mercer 2016 Quality of Living Survey Environmental/socio-economic QS World University Rankings University quality 2016/17 98* Knight Frank Global Cities Report Property costs for start-ups in tech cities CBRE European Tech Ranking Tech clusters employment, growth and attractiveness credentials European Digital City Index Key themes for a startup hub City Reptrak Study Reputation as a destination to visit, work, live and invest // 9

10 KBC / ESRI CONSUMER SENTIMENT INDEX dublin consumer sentiment weakens further in q4 180 Base 2003 = 100 Dublin sentiment overall consumer sentiment dublin National excl. dublin 160 q year on year change quarter on quarter change The Consumer Sentiment Index for Dublin weakened further in Q 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 Q 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 This could reflect a greater sensitivity in Dublin to developments such as Brexit and the US election which present risks to the Irish economy Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q4 10 Dublin Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 National excl. Dublin Q2 15 Q4 15 Q2 16 Q4 16 perceptions of current conditions decrease sharply 130 Base 2003 = 100 Dublin current conditions current conditions dublin National excl. dublin q year on year change quarter on quarter change The Dublin Index of Current Conditions fell sharply QoQ to in Q4 2016, down from in Q3. The equivalent Index outside of Dublin also declined, falling by 5.3 index points to 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 Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q4 10 Dublin Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 National excl. Dublin Q2 15 Q4 15 Q2 16 Q4 16 consumer expectations continue to trend down 230 Base 2003 = 100 Dublin expectations consumer expectations dublin National excl. dublin q year on year change quarter on quarter change 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 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 Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q4 10 Dublin Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 National excl. Dublin Q2 15 Q4 15 Q2 16 Q4 16 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 10 //

11 DUBLIN IHS MARKIT PMI growth of business output in dublin accelerates in q = no change overall ihs markit pmi (sa) increasing rate of growth overall ihs markit pmi dublin national excl. dublin 60 q year on year change quarter on quarter change The rate of growth in business activity in Dublin continued to quicken in Q 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 Q 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 Q4 01 Q1 03 Q2 04 Q3 05 Q4 06 Dublin Q1 08 increasing rate of contraction Q2 09 Q3 10 Q4 11 Q1 13 Q2 14 Q3 15 Q4 16 National excl. Dublin new orders rise sharply, albeit at reduced pace overall pmi new orders (sa) 50 = no change increasing rate of growth 65 new orders dublin national excl. dublin 60 q year on year change quarter on quarter change 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 Q 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 Q Q4 01 Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 Q4 08 increasing rate of contraction Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Dublin National excl. Dublin weaker rise in staffing levels overall pmi employment growth (sa) 50 = no change increasing rate of growth 65 employment growth dublin national excl. dublin 60 q year on year change quarter on quarter change With workloads continuing to rise, companies in Dublin increased their staffing levels in the final three months of 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 Q4 01 Q4 02 Q4 03 Q4 04 Q4 05 Q4 06 Q4 07 Q4 08 increasing rate of contraction Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 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 // 11

12 SPECIAL REPORT the dublin regional enterprise strategy 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 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 and Local Economic and Community Plans 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. 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. primary enterprise clusters dublin region, 2016 The vision of this strategy is the creation of a sustainable, globally competitive and innovative destination for enterprise development and living. 12 //

13 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: 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, // 13

14 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 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. 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 //

15 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 q unemployment rate q kbc/esri consumer sentiment q month moving average (sa) airport arrivals sept 2016 % (sa) index (2003 = 100) (sa) transport seaport cargo q public transport trips q , , '000s/month (sa) million tonnes/quarter (sa) million trips/quarter (sa) residential property average residential rents q residential property price index oct 2016 housing completions oct ,130 1, ,200 1,050 1, , , ,910 /month index 2005 = 100 units/month (sa) commercial property dublin city centre office rent q dublin 2/4 office vacancy rate q dublin suburbs office vacancy rate q /sq.m. % % sources: cso, except consumer sentiment kbc/esri; IHS markit; seaport cargo dublin port; public transport nta; residential rents rtb; commercial property cbre research // 15

16