Internet companies including Google Inc. (GOOG) and Yelp Inc. (YELP) are looking for additional space in the Irish capital, as are Salesforce.com Inc., (CRM) Bank of New York Mellon Corp. (BK) and Citigroup Inc. (C), according to people with knowledge of the searches. Facebook Inc. (FB) is seeking to more than double the size of its European headquarters in Dublin, three people briefed on the plans said in January.

The financial crisis that caused Ireland to seek a 67.5 billion-euro ($89 billion) international bailout in 2010 drove down commercial property rents as well as labor costs and sparked new government initiatives to attract investment. U.S. companies leased or bought about nine times more space in Dublin last year than they did in 2007, according to data from CBRE Group Inc. (CBG)

“Dublin is a much more cost-competitive destination than it may have been before,” said Robert O’Shea, a partner at legal firm Matheson Ormsby Prentice who advises U.S. companies on moving to Ireland. “That is reflected in the pipeline of projects we would see for 2012 and 2013.”

U.S. companies were involved in 38 percent of the office purchases or leases in Dublin last year, up from 22.8 percent in 2007, according to the CBRE data. Google’s purchase of the 210,000-square-foot (19,500-square-meter) Montevetro building in April alone equaled 81 percent of all Dublin’s office space bought or leased in 2007. The absorption of existing prime space means more U.S. companies will probably need offices built for them.

Selling Ireland

Foreign direct investment in Ireland rose to $18.3 billion in 1999 from $838 million in 1994, according to the United Nations, as the so-called Celtic Tiger boomed. Much of the investment came from U.S. companies like Intel Corp., the world’s largest chipmaker, and medical-products developer Medtronic Inc., which were attracted by a low corporate tax rate and inexpensive labor.

Since the financial collapse, the Irish government has been promoting the country’s affordability and its links to the U.S. as it tries to create 100,000 jobs by 2016 and reduce unemployment of 14.2 percent. Real estate in Ireland is “a steal,” Clinton told a forum of investors including private- equity executives Henry Kravis of KKR & Co. and Wilbur Ross of WL Ross & Co. on Feb. 9, according to the Irish Examiner newspaper.

Cheaper Now

IDA Ireland, the government agency responsible for attracting overseas investment, has a full-time employee whose job is to inform multinationals about Ireland’s falling rents, wages and construction costs. Ireland was the fifth most expensive location in the world for office accommodation in 2007, today it’s 45th, IDA Chief Executive Barry O’Leary said in an interview.

Commercial rents in Dublin are now around 55 percent lower than when the market peaked in 2007, and apartment rental costs are down by more than 60 percent, O’Shea said. Labor productivity rose 7.6 percent from 2008, the second most of the 27 countries that make up the European Union, which averaged 5.4 percent, according to an analysis byConstantin Gurdgiev, an adjunct lecturer in finance at Trinity College in Dublin.

Favorable Taxes

A corporate tax rate of 12.5 percent is a vital part of the attraction for U.S. companies, he said. So is transfer pricing, which involves the allocation of income between units in different countries to avoid taxes. Changes in copyright legislation are being considered and tax breaks are being offered to overseas workers who relocate to Ireland as the government seeks to attract more U.S. investment.

The 591,000 square feet of commercial space purchased or rented by U.S. businesses compares with about 59,000 square feet in 2007.

Most of the U.S. companies opening in Dublin “put a toe in the water to see what it’s like, see it’s easy to get good staff and then start expanding,” Fidelma Healy, chief operating officer at e-commerce company Gilt Groupe (Ireland), said in an interview. The company has about 70 employees in Ireland, 20 of them in Dublin, after it opened there last year.

MasterCard Inc. will add 130 employees in Dublin over the next four years and expand into new offices, the company said Feb. 15, without disclosing a new location.

Yelp, a social-networking and local-search company based in San Francisco, is also among the companies seeking to add space in Dublin, Jones Lang LaSalle Inc. said in a January report.

Google Wants More

Google, based in Mountain View, California, has 2,200 employees in Dublin, said IDA’s O’Leary. More than 3,000 will eventually be employed in its European headquarters there, according to a filing by the company’s Irish unit. The company is close to leasing 32,000 square feet of office space at East Point business park, according to two people familiar with the matter. The talks were first reported in The Irish Times in November. Celine Crawford, a Google spokeswoman, declined to comment.

Another Mountain View-based company, LinkedIn Corp. (LNKD), leased space in 2011 and has increased the number of employees to about 175 from 30 since last year, according to O’Leary.

Facebook is seeking to more than double the size of its European headquarters in Dublin ahead of its $5 billion initial public offering and is considering leasing the former Bank of Ireland headquarters building. More than 350 people work at its Dublin office, set up in 2008, according to O’Leary at the IDA.

Facebook Search

The social-networking site is also considering leasing part of the Ulster Bank headquarters in the city, according to two people familiar with the matter. They declined to be identified because the information isn’t public. Facebook, based in Menlo Park, California, and Ulster Bank’s parent company, Royal Bank of Scotland Group Plc (RBS), declined to comment.

Most of the social-networking companies have leased space near the city’s south docklands. That’s so they can recruit one another’s staff, said John Moran, managing director at Jones Lang’s Irish division. Endorsement from peers “is always enormously important,” which is why companies tend to cluster in a location, he said.

Though Dublin’s office vacancy rate is 19.5 percent, according to Jones Lang, a shortage of prime office space suitable for use by U.S. companies is emerging. That could spur new development of prime offices and rising rents.

Moran is currently seeking a 165,000 square-foot headquarters building for Bank of New York Mellon in Dublin. “To find a building in the location that we want, which is primarily south docklands, it will have to be built for us because there’s no pre-existing building of a size that actually suits our requirement,” he said in an interview.

New Buildings

Tenants that need new buildings will have to pay about 35 euros a square foot to make it worthwhile for the developer to build them, Moran said. Prime rents are about 20 percent less than that at present, according to the broker.

Financial-services and information-technology companies are expressing an interest in expanding, said Paddy Conlon, a CBRE director who advises multinationals seeking to set up or enlarge operations in Ireland. “A number of pharmaceutical companies are also looking to expand into Ireland” and others are considering moving their headquarters there, he said.

A willingness by landlords to sign three- to five-year leases suits U.S. companies because it allows them flexibility to expand, he said. “Rent is still a major factor, but it’s not just about rent.”

Development ‘Opportunity’

The shortage of buildings suitable for headquarters is “an opportunity to look at putting maybe some investment into that sector,” Brendan McDonagh, head of Ireland’s National Asset Management Agency, said by e-mail. State-run NAMA is “optimistic” that it will do deals with “a number of multinationals” in the coming months, he said. NAMA is liquidating bad assets of Irish banks.

Ireland’s Electricity Supply Board is considering an office building at its current headquarters in the central business district. Public transport agency CIE has sought planning permission to develop 81,500 square meters of offices of office space, equivalent to nearly a third of the Empire State Building in Manhattan, next to Dublin’s International Financial Service Centre.

Irish telecommunications billionaire Denis O’Brien, who controls the largest Caribbean mobile-phone operator, Digicel Group Ltd., may develop an office block on St. Stephen’s Green without a tenant agreeing to lease it in advance, according to Moran, who advises O’Brien on real estate.

Center and South

Salesforce is looking to rent office space in south Dublin and Citigroup’s Citibank is weighing renting office space near the city center, according to people familiar with the matter who declined to be named because they were not authorized to discuss it. Kerry Grove, a spokeswoman for San Francisco-based Salesforce, and Tara O’Reilly, a spokeswoman for New York-based Citigroup, declined to comment.

The IDA is already looking for the next wave of companies that will open in Ireland, O’Leary said. The organization keeps a list of companies run by former Google employees it encounters to identify future expansion candidates. The rapid growth of companies like Facebook, Zynga Inc. and Twitter Inc. led the IDA to set up a new unit in 2010 targeting companies with less than $30 million a year in revenue. Thirty five of them have since set up in Ireland, he said.

“We’ve already got the top 10 companies born of the Internet,” said O’Leary. “We ain’t gonna stop at that.”

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