Dublin Economic Monitor - October 2017

Dublin Economic Monitor issue 11

october 2017

In this issue LATEST DUBLIN ECONOMIC DATA IHS MARKIT DUBLIN PMI KBC/ESRI CONSUMER SENTIMENT RISING ECONOMIC ACTIVITY DRIVES IMPROVEMENTS IN DUBLIN’S LABOUR MARKET

F

E

A T

PAGE 12

BENCHMARKING DUBLIN'S COMPETITIVENESS

By Bryan Coughlan, Policy Analyst, Fingal County Council.

U

R

I

N

G

WELCOME

HIGHLIGHTS Dublin's unemployment rate dipped to a 9-year low of 6.1% in Q2 2017.

Residential rents in Dublin returned to strong levels of growth in Q2 2017 as average rents reached new peaks.

Residential property prices rose to a 9-year high with YoY growth rates exceeding 11% in both June and July.

Public transport trips continued to grow strongly to reach a new peak of over 52 million passenger journeys in Q2 2017.

Passenger arrivals at Dublin Airport maintained upward momentum in Q2 2017 on the back of greater connectivity to other international destinations.

Housing completions in Dublin increased to over 540 in May 2017 and will be expected to rise further on the back of greater levels of housing commencements.

The Dublin MARKIT PMI Dublin PMI data showed sustained expansions in business activity in Q3 2017, led mainly by the construction sector.

Dublin KBC/ESRI Consumer sentiment in Dublin climbed in Q3 2017, driven by positivity around the economy and rising expectations regarding employment prospects and the future economic situation. image: balbriggan harbour fingal county council

welcome to the october 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).

Successive iterations of the Monitor have presented a summary of various published rankings of Dublin’s performance in a

Dublin City Council

South Dublin County Council

comparative international context (page 9) and this quarter shows a broadly positive movement in our international reputation. In this edition we delve a little deeper to take a look at some of the economic factors driving this performance.

Fingal’s Bryan Coughlan assesses Dublin’s competitiveness across a range of metrics and comparator cities (page 12).

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 25th January 2018. Interactive charts from the Monitor are available on the Dublin dashboard www.dublindashboard.ie.

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 //

ECONOMY

NATIONAL ECONOMY

The global economy strengthened over the first half of 2017, driven by improved investment, trade and industrial production. Growth of 3.6% is expected for this year as rising domestic demand in advanced economies and China is supported by improved performances in developing economies.

The Eurozone and emerging European countries have experienced higher than expected growth in early 2017 and this is a most positive development from an Irish perspective, particularly in light of Brexit.

Accommodative monetary conditions have supported the recovery in the Eurozone along with improved global trade patterns, though low inflation is a persistent issue.

Supportive monetary conditions are also seen as important to the performance of the US economy which is forecasted to grow by 2.2% in 2017. The domestic demand factors of investment and private consumption are expected to be to the fore, but a deepening

Budget 2018 has dominated the Irish economic landscape in recent weeks and yet did not ultimately produce any seismic policy shifts.

The Government introduced marginal reductions in income taxation and increases in health, social welfare and capital expenditure which consumed the majority of the available ‘fiscal space’ of approximately €1.2 billion. Revenue measures to fund these expansions primarily came from a threefold increase in commercial stamp duty from 2% to 6%, along with a range of other measures including reduced mortgage interest relief.

The Budget was based on economic forecasts which estimated that Irish GDP would grow by over 4% in 2017, before slowing to 3.5% in 2018. This would suggest that the Irish economic recovery is now in a mature phase with growth rates in private consumption, government expenditure and exports slowing following a number of years of exceptional growth.

euro: sterling exchange rate

total voted government expenditure & growth patterns 2013-2018f

€1.35

€1.25

Gross Total Expenditure (€bn)

€1.30

General Election Result

Conservative Party Conference

€1.20

€1.15

Oct 17

Sep 17

Jul 17

Aug 17

Jun 17

Apr 17

May 17

Jan 17

Feb 17

Jan 17

Dec 16

Oct 16

Article 50 Triggered

Nov 16

Sep 16

Jul 16

Aug 16

Jun 16

Apr 16

May 16

€1.05

Brexit Referendum Result

Mar 17

€1.10

€62

20%

€60

15%

€58

10%

€56

5%

€54

0%

€52

-5%

€50

-10%

€48

2013

2014

2015

Gross Total Expenditure - Left Axis

2016

2017E

2018F

YoY Expenditure Growth (%)

GLOBAL ECONOMY

-15%

Current Expenditure Growth - Right Axis

Capital Expenditure Growth - Right Axis

source: central bank of ireland.

source: department of public expenditure & reform, budget 2018.

lack of clarity over fiscal policies from the Trump administration is a cause of considerable uncertainty.

The UK’s economy is the notable black spot in an Irish context, with economic growth forecasted to reach a weaker than expected level of 1.7% in 2017. Softening private consumption is a decisive factor, and this has resulted from rising inflation driven by the depreciation of the pound (see chart). Uncertainty surrounding the UK’s future trade, migration and financial services arrangements are also considered to be weights on the country’s potential economic growth in the medium term as Brexit negotiations continue.

The National Accounts for Q2 2017 were in line with these forecasts, and showed that the Irish economy continued to grow at robust rates in the first half of the year. Personal consumption, although down QoQ as a result of a reported fall off in second-hand car purchases, did increase by 1.7% YoY in Q2 2017 and was supported by a 2.1% YoY increase in Government spending. An improvement in net exports was also recorded, and these factors more than offset a decrease in investment (-8.8% YoY) which has been significantly affected by movements of Intellectual Property into Ireland in recent years.

irish macroeconomic growth forecasts major economies gdp growth forecasts

global uk us euro area germany japan china india source: imf, october 2017.

2016 %

2017 %f

2018 %f

3.2 1.8 1.5 1.8 1.9 1.0 6.7 7.1

3.6 1.7 2.2 2.1 2.0 1.5 6.8 6.7

3.7 1.5 2.3 1.9 1.8 0.7 6.5 7.4

gnp gdp private consumption public expenditure investment exports imports unemployment rate cpi inflation* debt:gdp ratio** source: department of finance, budget 2018

2016 %

2017 %f

2018 %f

9.6 5.1 3.3 5.3 61.2 4.6 16.4 7.9 0.0 72.8

0.0 4.3 2.3 2.0 -3.7 3.5 -1.0 6.3 1.1 70.1

3.3 3.5 2.3 2.0 6.1 4.8 5.5 5.7 1.4 69.0

*source: esri qec autumn 2017. **general government balance

// 3

DUBLIN ECONOMY

RISING ECONOMIC ACTIVITY DRIVES IMPROVEMENTS IN DUBLIN’S LABOUR MARKET

construction sector rebound central to expansions in business activity & employment The Dublin unemployment rate continued on a downward trajectory in Q2 2017 to reach a nine-year low of 6.1%. This was 1.4 percentage points (pp) below the same quarter in 2016 and underlined the significant ongoing progress which is being made in job creation across the capital. Unsurprisingly, the construction sector has led employment growth in Dublin in recent quarters, with high levels of office construction and rising house building levels feeding through to employment. The sector now employs over 36,000 workers which is roughly midway between the extremes of the trough in 2013 (17,800) and the peak in 2008 (59,700).

In a related context to the improving labour market, demand for office space remains very high in the capital. According to CBRE, the Dublin office vacancy rate stood at 6.2% in Q3 2017 while average rents remained at peak levels. Of great significance is the Grade A office vacancy rate of 2.6% in Dublin 2/4 which is extremely low, and could prove problematic for high-end firms looking to expand or establish in the city. However, it will be expected that the high levels of office construction occurring in Dublin 2/4 at present will at least partially offset this low vacancy rate in the medium term.

Dublin’s public transport system continues to show strong levels of growth with over 52 million passengers using the service in Q2 2017. This was a new peak in the series and represented a YoY increase of 2.6 million trips or 5.3%.

Passenger trips on the Luas in particular are expected to increase by up to 10 million per annum from December 2017 onwards with the opening of the Luas Cross City which will link Broombridge and St. Stephen’s Green, completing a project which was commenced in 2013. Such passenger growth would represent close to a 30% increase on the total passenger journeys recorded on the Luas in 2016 (34.2 million). The project, which will cost an estimated €368 million, will also connect the heretofore separate Green and Red Luas lines.

Throughput volumes at Dublin Port have continued to climb in recent quarters in spite of international uncertainty and the

4 //

depreciation of sterling. The Port handled over nine million tonnes of throughput for the first time in Q2 2017, with strong QoQ import growth (which is likely linked to the weakness of sterling) supported by a more modest expansion in exports.

Positive trends in the Dublin labour market are cited as key drivers to further increases in consumer sentiment levels in Q3 2017, according to KBC/ESRI. Austin Hughes, Chief Economist at KBC Bank Ireland, notes:

“Dublin consumer sentiment saw a strong improvement as the persistence of healthy trends in activity and employment eased earlier fears of a sharp Brexit related slowdown. This increased confidence was also reflected in a marked upgrade of the buying climate by Dublin consumers that should help underpin consumer spending in the capital.”

Dublin’s IHS Markit Purchasing Managers’ Index (PMI) for Q3 2017 also showed positive signs with business activity continuing to expand at a robust pace. Andrew Harker, Senior Economist at IHS Markit, explains:

“The Dublin private sector economy continued to grow strongly during the third quarter of 2017, supported by sharp rises in new work. There was a welcome pick-up in the rate of job creation following a slowdown in Q2, with firms increasingly willing to take on extra staff in line with higher workloads. The capital’s economy, therefore, looks in good shape to end the year on a positive note.

All three monitored sectors saw output expand, with the construction sector again the best performer. Growth outside of Dublin also remained strong in Q3, highlighting the broad-based nature of the current upturn.”

DUBLIN ECONOMIC INDICATORS

DUBLIN ECONOMIC INDICATORS

moderate decline in unemployment in q2 2017

16%

q2 ' 17 6.1% -1.4 628.6 +9.9

source: cso qnhs seasonally adjusted BY DKM..

Dublin Max 13.1%

12% 10% 8% 6%

employment continues to rise despite industrial sector lag q2 ' 17 536.6 +6.5 84.9 +2.1

4%

Dublin

Q2 17

Q3 16

Q4 15

Q1 15

Q2 14

Q3 13

Q4 12

Q1 12

Q2 11

Q3 10

0%

Q4 09

2%

Q1 09

Dublin's seasonally adjusted unemployment rate declined by 0.3 percentage points (pp) QoQ in Q2 2017 to stand at a nine-year low of 6.1%. This was 1.4pp below the same quarter in 2016 and reflected improving labour market conditions in the capital where almost 10,000 jobs were created YoY. At the national level the unemployment rate has declined in each of the last six quarters to stand at 6.2% in Q2 2017. The small differential between the unemployment rates at the Dublin and national levels is a strong sign of a nationwide economic recovery.

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

National Max 15.1%

14%

Q2 08

dublin unemployment (sa) year on year change % points (sa) dublin employment '000s (sa) year on year change '000s (sa)

dublin & national unemployment rate % (sa)

National

source: cso qnhs. dublin seasonally adjusted by dkm note: this series has been re-calibrated since the last issue'

employment by broad sector '000s (sa) 700

Max: 631,400

621,400

600

500

400

source: cso qnhs, seasonally adjusted BY DKM.

Employment levels in Dublin rose at a modest rate in Q2 2017 with the construction sector driving growth on both a QoQ and YoY basis. Total employment increased at a seasonally adjusted rate of 1.5% YoY with the construction and public sectors recording the strongest growth rates at 21.7% and 3.6% YoY respectively. Industry recorded a YoY decline in employment levels but this was more than offset by the robust job creation in construction. Private sector services employment was broadly stable YoY.

300

200

100

0

Q2 08

Q2 09

Q2 10

Q2 11

Private Sector Services

Q2 12

Q2 13

Public Sector

Q2 14 Industry

Q2 15

Q2 16

Q2 17

Construction

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

This series has been re-calibrated since the last issue

// 5

DUBLIN ECONOMIC INDICATORS

residential rents reach new peaks

70 60

Dublin

Jul 17

Nov 16

Mar 16

Jul 15

Nov 14

Mar 14

Jul 13

Nov 12

Mar 12

40

Jul 11

50

National Excl Dublin

source: cso.

€1,650

€1,150 €1,050 €950 €850 €750

Dublin House

National ex Dublin House

Dublin Apt

Q2 17

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

€550

Q4 08

€650

National ex Dublin Apt

source: rtb.

dublin housing commencements & completions (sa) 2,000 1,800

Completions Max: 1,750

1,600 1,400 1,200 Commencements Max: 1,030

1,000 800 600 400

Completions

Commencements

source: dhplg. seasonally adjusted by dkm. note: series has been re-calibrated since the last issue. completions data has been adjusted to accommodate a 2014 change in the method of data collection

May 17

Jul 16

Dec 16

Feb 16

Apr 15

Sep 15

Jun 14

Nov 14

Jan 14

Mar 13

Aug 13

Oct 12

May 12

Dec 11

Jul 11

Feb 11

Apr 10

Sep 10

0

Jun 09

200 Nov 09

The supply of units to Dublin's housing market showed signs of significant progress in the second quarter of 2017 as both commencements and completions grew at strong rates. Housing commencements doubled YoY in each month between March and May with a seasonally adjusted combined total of over 2,500 units commencing. Completion levels grew at a a more modest rate with almost 1,400 houses (seasonally adjusted) being finished in the three-month period. This will be expected to rise further over the coming quarters as the increase in commencements feeds through to the market.

€1,250

Jan 09

source: dhplg. seasonally adjusted by dkm.

€1,350

Mar 08

may ' 17 871 +466 544 +99

Dublin Apt Max: €1,475

€1,450

Aug 08

housing supply shows signs of progress

Dublin House Max: €1,538

€1,550

Oct 07

q2 ' 17 1,538 +39 1,475 +94

Residential rents in Dublin climbed to new peaks in Q2 2017, and more than offset decreases in average rents which occurred in Q1 2017. The average monthly rent for a Dublin house rose by 2.6% YoY to stand at €1,538 in the quarter. Average monthly rents for Dublin apartments increased at an even sharper rate of 6.8% YoY to reach €1,475. Outside the capital, average monthly rents increased by over 7% YoY but remain substantially below the equivalent rents in Dublin.

6 //

80

residential rents € per month

source: rtb.

total house commencements (sa) year on year change total house completions (sa) year on year change

90

May 07

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

110 100

Nov 10

Residential property price growth accelerated sharply in Dublin in Q2 2017 as limited new supply continued to affect the market. YoY growth rates increased in each month in the quarter and reached 12.7% in July. This drove the property price index to 99.3 which is the highest point since early 2009. Double- digit YoY growth rates have also been recorded outside of Dublin in each of the last nine months as property prices continue to recover across much of the country.

Dublin Max 126.2

120

Mar 10

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

130

Jul 09

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

140

Nov 08

jul ' 17 99.3 +12.7 87.7 +11.7

residential property price index (2005 = 100)

Mar 08

sharp acceleration in property price growth

DUBLIN ECONOMIC INDICATORS city centre office rents climb to new peak city centre office rent index year on year % change south suburbS office rent index year on year % change

q3 '17 115.0 +5.6 110.0 0.0

dublin office rents index (2006 = 100) 120

City Centre Max = 115 South Suburbs Max = 110

110 100 90 80

source: CBRE

overall office vacancy rate falls in q3 2017 vacancy rate % dublin 2/4 year on year change % points vacancy rate % dublin suburbs year on year change % points

70 60

City Centre

Q3 17

Q1 17

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

Q3 08

40

Q1 08

50

Q3 07

Office rents in Dublin were broadly stable in Q3 2017, with the notable exception of Dublin city centre where rents increased by 1.2% QoQ and 5.6% YoY to reach the highest point on the index (115) since the series began in 2006. Office rents were flat across the other areas of the capital, with take-up reported to be weak following a very strong first half of 2017. Of the take-up recorded across Dublin in Q3, financial services (36%) and high tech firms (20%) accounted for the majority of new tenancies.

South Suburbs

source: cbre.

dublin office space vacancy rates % 30%

q3 '17 5.6 +0.4 8.0 -2.8

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

25% 20% 15%

source: cbre.

10%

Dublin 2/4

Q3 17

Q1 17

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

Q1 10

Q3 09

0%

Q1 09

5%

Q3 08

The overall office vacancy rate in Dublin fell to 6.2% in Q3 2017, down 0.3 percentage points (pp) on the previous quarter. The most sizeable reduction in vacancy was recorded in the suburbs where the vacancy rate reduced by 1.7pp QoQ and 2.8pp YoY to stand just below 8%. Vacancy rates rose by 0.5pp and 0.6pp QoQ in Dublin City Centre and Dublin 2/4 respectively to stand at 5.1% and 5.6% in Q3.

Dublin Suburbs

source: cbre.

48

46

Q2 17

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

42

Q4 12

44

Q2 12

Dublin's public transport system recorded over 52 million passenger trips (seasonally adjusted) in the second quarter of 2017, despite strike action on Bus Eireann routes in April. This was the highest level recorded since the series began in 2010, and represented a substantial increase of 2.6 million trips or 5.3% YoY. Luas passenger trips will be expected to increase further from Q4 2017 onwards with the planned opening of the Luas Cross City connecting Broombridge and St. Stephen's Green in December.

50

Q4 11

source: nta seasonally adjusted by dkm.

52

Q2 11

q2 '17 52.2 +2.6

54

Q4 10

public transport million trips (sa) year on year change (sa)

public transport million trips (sa)

Q2 10

passenger trips on public transport increase despite strike action

source: nta. seasonally adjusted by dkm. note: this series has been re-calibrated since the last issue.

// 7

DUBLIN ECONOMIC INDICATORS dublin airport growth underpinned by gateway connectivity 1,250

source: cso, seasonally adjusted by dkm.

Max: 1,235

1,150 1,050 950 850 750 Severe Winter Weather

650

Jun 17

Jan 17

Aug 16

Oct 15

Mar 16

May 15

Jul 14

Dec 14

Feb 14

Apr 13

Sep 13

Jun 12

Nov 12

Jan 12

Aug 11

Oct 10

Mar 11

May 10

Jul 09

Dec 09

550

Feb 09

Icelandic Ash Cloud

Apr 08

Passenger arrivals at Dublin Airport remained close to 1.2 million (seasonally adjusted) in each month of Q2 2017, having reached a new peak of 1.23 million arrivals in March.

YoY growth exceeded 4% in each month between April and June, continuing a sequence of consecutive months of YoY growth which stretches back to mid-2012. Dublin Airport has reported that one of the strongest drivers of growth this year has been passengers choosing the airport as a gateway to connect onwards to other international destinations.

Sep 08

total arrivals '000s (SA) year on year change '000s (sa)

jun '17 1,197.5 +72.8

dublin airport arrivals '000s (sa)

source: cso. seasonally adjusted by dkm.

hotel room rates and occupancy remain high hotel occupancy rate % (sa) year on year change %age point index of hotel room supply (sa, 2011=100) year on year change %

7.5 7.0 6.5

Min: 6.4 million tonnes

Q2 17

Q4 16

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

Q2 12

Q4 11

5.5

Q2 11

6.0

Q4 10

Throughput at Dublin Port increased by 3.9% YoY in Q2 2017 to exceed nine million tonnes (seasonally adjusted) for the first time, more than offsetting a minor decline in Q1. Imports, which account for the majority of throughput at the port, were the main driver, while an expansion in export activity was also recorded. The continued strong performance of Dublin Port is a major positive for the Dublin economy, especially in light of international uncertainty around Brexit.

8.0

Q2 10

source: dublin port. seasonally adjusted by dkm. note: imports and exports may not add to total throughput due to seasonal adjustment and rounding.

8.5

Q4 09

imports million tonnes (sa) million tonnes (sa)

Max: 9 million tonnes

9.0

Q2 09

exports million tonnes (sa) million tonnes (sa)

9.5

Q4 08

dublin port yoy change dublin port yoy change

q2 ' 17 3.7 +0.2 5.3 +0.1

dublin port tonnage million tonnes (sa)

Q2 08

quarterly port throughput exceeds 9m tonnes for first time

source: dublin port. seasonally adjusted by dkm. note: this series has been re-calibrated since the last issue

dublin hotel average daily rates (sa) €150

sept ' 17 82.4% -0.4 101.0 -0.2%

€140

Maximum: €139

€130 €120

source: str. seasonally adjusted by dkm.

8 //

€110

source: str. seasonally adjusted by dkm.

Sep 17

Jul 17

May 17

Jan 17

Mar 17

Nov 16

Jul 16

Sep 16

May 16

Mar 16

Jan 16

Nov 15

Sep 15

Jul 15

May 15

Mar 15

Jan 15

€90

Nov 14

€100

Sep 14

Average Daily Rates (ADRs) for hotel rooms in Dublin continued to rise in Q3 2017 to stand at €139 (seasonally adjusted) in September. This was 8% or €10 above the equivalent ADR in September 2016. Market supply has been largely static across 2017 with few new hotel rooms coming on stream. Occupancy reached 82.4% in September 2017 and has also been largely stable across the year. Significant new supply is planned for the coming years in the capital and this will be expected to dampen occupancy rates long-term.

DUBLIN’S INTERNATIONAL RANKINGS

BROADLY POSITIVE MOVEMENTS IN DUBLIN’S INTERNATIONAL REPUTATION 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 Knight Frank Global Cities Report ranked Dublin at 13th out of 19 worldwide cities in terms of expense for businesses employing staff. The capital was ranked favourably compared to London but fell short of Frankfurt and Amsterdam with estimated annual wage and rental costs of €3.4 million per 100 staff. Declan O’Reilly, Director of Knight Frank in Dublin, highlighted how flexibility is vital to companies taking up office

space in Dublin, particularly in the tech sector: “We are seeing the traditional 25year institutional lease of old giving way to more flexible terms of shorter duration. The drive for flexibility is also influencing occupier fit-out habits, with activity-based working and co-working culture set to take-off in a significant way. Lastly, tech employees are seeking the flexibility allowed by living close to work, which is driving demand for city centre apartment living.”

The 2018 Global Financial Centres Index also reflected Dublin’s strengthening global competitiveness as the capital moved up three places to 30th, and was named as one of 15 worldwide centres “likely to become more significant”.

In education, PitchBook maintained Trinity College Dublin’s ranking as Europe’s leading university for producing venture

capital-backed entrepreneurs from its undergraduate programmes. 216 alumni had successfully raised almost $2.4 billion in capital between 2006 and 2017, ensuring the university’s position at 48th in the world.

The capital’s reputation as a host for conferences was improved in 2017 according to the International Congresses and Conventions Association. Dublin ranked as the 13th most popular destination worldwide having hosted 118 international conferences in 2016. This represented an improvement of five places YoY. Although Dublin performed strongly in many rankings, house price growth in Dublin was the 36th highest in the world in the 12 months to Q2 2017 according to Knight Frank. Price growth was weaker than in Toronto and Amsterdam but stronger than in the likes of New York and London, and this is an issue which is likely to have implications for the city’s competitiveness.

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

BENCHMARK CRITERIA

YEAR

RANKING

CHANGE‡

FDI Intelligence Global Cities of the Future

Socio-economic

2017

3

-

Global Financial Centres Index (GFCI)

Business environment, financial sector development, infrastructure, human capital, reputational & general factors; online survey

2017

30

▲

Knight Frank Global Cities Report

Cost to businesses of employing 100 people

2017

13

-

PwC Emerging Trends in Real Estate Europe 2017

Real estate investment, development

2017

4

▼

Knight Frank Global Residential Cities Index

House price growth

2017

36

▼

IMD World Competitiveness Yearbook Rankings (Ireland)

Economic performance, government efficiency, business efficiency & infrastructure

2016

7

▲

Mercer 2017 Cost of Living Survey

Cost of consumer goods and services

2017

66

▲

Mercer 2017 Quality of Living Survey

Environmental/socio-economic

2017

34

▼

QS World University Rankings

University quality

2017

88*

▲

2017

48*

-

2016

6

-

2017

13

▲

2016

20

▲

PitchBook Top Universities for Venture Capital-backed Origin of companies which received a first entrepreneurs round of venture capital Tech clusters’ employment, growth and CBRE European Tech Ranking attractiveness credentials International Congresses and Conventions Association International association conferences hosted (ICCA) World Rankings Reputation as a destination to visit, City Reptrak Study work, live and invest * tcd. ‡change on previous publication of the relevant benchmark. an upward-pointing arrow denotes an improvement.

// 9

KBC / ESRI CONSUMER SENTIMENT INDEX

100 80

Dublin

130

dublin

National excl. dublin

120

121.0 +5.8 +6.8

124.9 -2.1 -2.5

110

consumer expectations increase further

Q3 17

Q1 17

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

90 80 70 60

Q3 17

Q1 17

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q1 12

Q3 11

Q1 11

40

Q3 10

50

National excl. Dublin

Dublin expectationS 230

National

dublin excl. dublin 200.5 +12.7 +10.6

Q1 14

100

Dublin

q3 2017 year on year change quarter on quarter change

Q3 13

National excl. Dublin

Base 2003 = 100

Q1 10

There was a further QoQ increase in the Dublin Index of Current Conditions of 6.8 index points in Q3 2017. The main driver was an improvement in the consumer sentiment particularly for large household purchases. There was also an increase in consumers reporting their personal financial situation had improved over the past year. This largely reflects improving domestic labour market conditions.

consumer expectations

Q1 13

Q3 12

Q3 11

Q1 12

40

Q1 11

60

Q3 09

q3 2017 year on year change quarter on quarter change

120

Dublin current conditions

perceptions of current conditions positive current conditions

140

Q3 10

The overall Dublin Consumer Sentiment Index increased by 8.6 index points QoQ in Q3 2017 reflecting an increased positivity around the economy and improved expectations regarding the future economic situation and employment prospects. This was 9.0 index points above the level observed in Q3 2016.

The pace of growth outside Dublin was slower in the quarter due to diverging perceptions regarding the current financial environment and future personal finances.

160

Q1 10

159.0 +4.8 +1.7

Q3 09

159.1 +9.0 +8.6

Q1 09

National excl. dublin

Q1 09

q3 2017 year on year change quarter on quarter change

dublin

180

Q3 08

consumer sentiment

Dublin sentiment overall Base 2003 = 100

Q3 08

substantial improvement in dublin consumer confidence

191.5 +11.3 +5.6

Base 2003 = 100

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 10 //

National excl. Dublin

Q3 17

Q1 17

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

Q1 10

Q3 09

30

Q1 09

50 Q3 08

Dublin consumers’ views on the Irish economy improved considerably in Q3 2017, with the expectations data suggesting that the fears concerning last year’s UK referendum vote to leave the EU are somewhat dissipating. The continuing decline in the unemployment rate also appears to be feeding into more positive labour market prospects. Outside the Capital, overall expectations have increased but consumers are marginally more pessimistic about their future personal finances than in Dublin.

DUBLIN IHS MARKIT PMI dublin output increases sharply again in q3

overall ihs markit pmi (sa) 65

dublin

national excl. dublin

60

q3 2017

57.9

58.3

55

year on year change

-0.3 -1.5

+0.6 +0.9

50

overall ihs markit pmi

quarter on quarter change

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

further sharp rise in new orders

65

national excl. dublin

60

q3 2017

58.9

58.4

55

year on year change

+0.5 +0.1

+2.3 +0.6

50

quarter on quarter change

Q3 17

Q3 16

Q3 15

Q3 14

Q3 13

Q3 12

Q3 11

National excl. Dublin

overall pmi new orders (sa)

dublin

new orders

Q3 10

Q3 09

Q3 08

Q3 07

Q3 06

Q3 05

Q3 04

Q3 03

increasing rate of contraction ▼ Q3 02

25

Q3 01

The third quarter of 2017 saw a further sharp increase in private sector output in Dublin. The Dublin PMI registered 57.9, down from 59.4 in Q2 but still well above the 50 no-change mark.

Growth was again led by construction, but higher output was also seen in manufacturing and services.

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

job creation accelerates dublin

national excl. dublin

60

q2 2017

58.9

55.4

55

year on year change

+0.8 +4.1

+0.3 0.0

50

quarter on quarter change

Q3 17

Q3 16

Q3 15

Q3 14

Q3 13

Q3 12

Q3 11

National excl. Dublin

overall pmi employment growth (sa) 65

employment growth

Q3 10

Q3 09

Q3 08

Q3 07

Q3 06

Q3 05

Q3 04

Q3 03

increasing rate of contraction ▼ Q3 02

25

Q3 01

New orders by businesses in Dublin rose strongly in the third quarter of 2017, with the rate of expansion not changing significantly from Q2. New business has increased continuously since Q4 2012. The expansion of new orders in Dublin was slightly faster than in the rest of Ireland.

Companies in Dublin continued to increase their staffing levels in Q3 2017. The rate of job creation was substantial, having picked up from the previous quarter. Dublin firms raised employment at a stronger pace than the rest of Ireland.

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

Q3 17

Q3 16

Q3 15

Q3 14

Q3 13

Q3 12

Q3 11

Q3 10

Q3 09

Q3 08

Q3 07

Q3 06

Q3 05

Q3 04

Q3 03

Q3 02

increasing rate of contraction ▼ Q3 01

25

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

BENCHMARKING DUBLIN'S COMPETITIVENESS

BY BRYAN COUGHLAN POLICY ANALYST, ECONOMIC, ENTERPRISE AND TOURISM DEVELOPMENT, FINGAL COUNTY COUNCIL

Following a number of years of difficult economic conditions, the Irish and Dublin economies have recovered to rank amongst the most competitive in Europe. Business costs in the capital remain relatively low, while the labour market has improved and contributed to high levels of value added per capita. The challenge for policymakers is to ensure that this competitiveness is maintained through the uncertain times which lie ahead. an improving national picture

employment and productivity

After dropping to 24th place in the IMD Competitiveness rankings in 2011, Ireland climbed again to 6th position this year, our highest placing since 2001. As the capital city, comprising 45% of the national economy, Dublin’s competitiveness warrants closer investigation within this overall picture. This article summarises some recent analysis by Fingal County Council which considers the region’s competitiveness in a comparative international context.

Dublin has experienced steady productivity growth over the past number of years. Of comparator cities included in this analysis, only two had higher gross value added per capita in 2016 and while a portion of this can be accounted for by issues affecting Ireland’s GDP measurement, the divergence between Ireland’s productivity growth and that of the EU has been evident from the late 1990s1.

ireland's imd competitiveness ranking, 2000 - 2017

Gross value added per capita in European cities (2016)

1

90,000 80,000

6

70,000

EUROS (€)

RANKING

60,000 11

16

50,000 40,000 30,000 20,000

21

source: cso. seasonally adjusted by dkm.

12 //

source: cso.

Copenhagen

Lisbon

Madrid

Barcelona

Berlin

Rome

Vienna

Milan

Helsinki

London

Stockholm

Dublin

Brussells

Frankfurt

2016

2015

2014

2013

2011

2012

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0 2000

26

Amsterdam

10,000

change in unemployment rate 2011 - 2016

employment change 2011 - 2016 15

4

10

2 PERCENTAGE CHANGE

PERCENTAGE CHANGE

5

0

-2

-4

0 -5 -10 -15

-6

source: Eurostat.

Madrid

Berlin

Rome

Milan

Brussells

Lisbon

EU

Barcelona

Paris

Zürich

Frankfurt

Stockholm

Amsterdam

Vienna

Copenhagen

Dublin

London

Rome

-25

Vienna

Paris

Milan

Zürich

Amsterdam

Stockholm

Madrid

Brussels

Frankfurt

EU

Copenhagen

Berlin

Lisbon

Dublin

London

-8

-20

source: oecd

Employment in Dublin has increased by 13.4% between 2010 and 2017, equating to a net increase of 74,4002 jobs, the strongest rate of employment growth across EU cities benchmarked here. Dublin has also had the largest reduction in unemployment.

“

Overall, producer price indices show that Ireland’s business costs are broadly growing in line with those typical of EU countries.”

business costs While the range of business costs are typically higher in Dublin than elsewhere in Ireland, comparisons with international cityregions show more moderate results.

Dublin has remained reasonably priced for office space.

Compared to London, the cost of construction of office space is 41% more competitive and the construction of high-tech manufacturing premises is 27% cheaper3.

While data for Dublin is not available across all metrics, national indicators show a reasonable performance. To date, Irish wage growth has been largely contained despite tightening in the labour market. Average labour costs in Ireland compare favourably with major European economies and energy costs - such as natural gas and industrial electricity - are also competitively priced4. ►

producer price index for industry and services, 2016 (2010 = 100)

Industry

120

Services

INDEX PRICE

100

80

60

Denmark

Ireland

UK

Germany

Luxembourg

Spain

Portugal

EU

Italy

France

Austria

Netherlands

Finland

Sweden

Belgium

20

Switzerland

40

source: Eurostat 1. eurostat data shows that irish productivity has increased by 131.3% between 1996 and 2016, compared to average eu growth of 29.5%.

2. cso quarterly national household survey q4 2010 – q2 2017.

3. turner and townsend: international construction market survey 2016 4. eurostat data shows that labour cost per hour and income tax and social security contributions are lower in ireland than in many other european economies, including austria, germany, netherlands, france and belgium. industrial electricity is cheaper than the eu average in ireland, with natural gas marginally more expensive than the eu average.

// 13

knowledge economy

14 //

2.0 % 1.5 % 1.0 %

Spain

Austria

Italy

Luxembourg

Brussells

EU

Barcelona

Portugal

Germany

Sweden

Milan Region

Masters or above

France

Netherlands

Norway

Belgium

Switzerland

Finland

United Kingdom

Ireland

0.0 %

Denmark

0.5 %

Bachelors or above

source: cso.

share of workforce employed in high value-adding sectors (2016) 18 % 16 % 14 % 12 % 10 % 8% 6% 4%

Financial and insurance activities source: cso.

Rome Region

Amsterdam

Berlin

Lisbon

Frankfurt

Copenhagen

Madrid

Stockholm

0%

Paris

2% Zürich

While much of this analysis points to the ongoing strengths of Dublin as an investment location, close attention must be paid to challenges and pitfalls on the horizon. These include uncertainties in relation to Brexit, the need to address supply-side issues in the city’s economy - principally housing – continuing efforts to increase the level of innovation in the enterprise base in Dublin and guarding against the threat of wage inflation as the labour market tightens further.

Policymakers must remain vigilant to these and other issues to ensure that the relative gains achieved over the past number of years are not eroded.

2.5 %

Dublin

policy challenges

proportion of stem graduates in the population aged 25 - 65

London

Turning first to national data, of those who have completed education, 48% have a third-level qualification. Further, a comparatively large portion of these qualifications are in high value-adding fields, such as science, technology, engineering and maths (STEM).

This is reflected in the concentration of the Dublin workforce employed in high value-adding sectors of the economy, with 7.4% of people employed in ICT and 8.7% in the financial and insurance sector. Again, this is higher than most comparator city regions.

The data bears out the strength and importance of particular sectors of the region’s economy. IDA Ireland has highlighted our attractiveness for technology sector investment projects and Dublin has been to the fore in this regard. In addition to talent availability set out here, Dublin brings clear advantages in terms of our track record, connected technology infrastructure and vibrant start-up scene. Similarly, the data underlines strengths in financial services activity in Dublin. In the aftermath of Brexit, further investment in this sector is anticipated and this can assist in ameliorating negative impacts elsewhere in the region’s economy.

Information and communication

ECONOMIC SCORECARD

dublin: economic scorecard october 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 q3 2017

46

51

8

40

57

57.9

34

unemployment rate q2 2017

100

10

6

63

kbc/esri consumer sentiment q3 2017

70

11

6.1

5

3 month moving average (sa)

120

13

159

53

% (sa)

140

160

index (2003 = 100) (sa)

transport airport arrivals june 2017

860

990

740

7.5 1,110

1,198

610

seaport cargo q2 2017

1,235

000's/month (sa)

public transport trips q2 2017

8.0

7.0

8.5

9.0

6.4

48.6

46.8 45.0

9

million tonnes/quarter (sa)

43.2

50.4

52.2

million trips/quarter (sa)

residential property average residential rents q2 2017

1,160

1,260

1,070

973

residential property price index july 2017

1,451

1,451

70

118

99.3

55

â‚Ź/month

1,100

700

102

86 1,350

housing completions may 2017

134

index 2005 = 100

400

1,400

544

61

1,750

units/month (sa)

commercial property dublin city centre office rent q3 2017

450

520

681 â‚Ź/sq.m.

10

5

dublin suburbs office vacancy rate q3 2017

25

5.6 %

18

15

20

15 600

370

296

dublin 2/4 office vacancy rate q3 2017

30

11

22

8.0

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