There is strong competition to net Google as a tenant. Gretchen Friemann reports

The world's most popular internet search engine, Google, has decided to locate its European headquarters in an office development on the former gasworks site in Dublin's docklands.

The US-based company is understood to have agreed rental terms for 5,574 sq m (60,000 sq ft) of The Gasworks, an ambitious and large-scale development scheme on Barrow Street in Dublin 4, which is being carried out by Liam Carroll, who took control last year of the former plc Dunloe Ewart. Confirmation of Google's new European hub comes exactly a year after the company arrived in the country.

According to industry sources, the 12-month search for a base was due to the internet firm's determination to capitalise on the weakness of Dublin's office market where rental values in outer city developments have sunk by as much as 20 per cent over the last two years.

It's understood Google has been locked in negotiations for months with rival developer Bernard McNamara, whose company Michael McNamara & Company is currently building a 12,077 sq m (130,000 sq ft) mixed apartment and office scheme directly across the road from Mr Carroll's site.

One source said: "Google was looking for suburban rents in a city centre area. Basically, they were playing one developer off against another to drive down the rent as much as possible."

It's believed Google opted for the former gasworks site after it was unsuccessful in negotiating a rent below €4,843 per sq m (€45 per sq ft) at Mr McNamara's Grand Mill Quay. The leasehold about to be signed on the gasworks site is understood to be between €452/€462 per sq m (€42/€43 per sq ft), with one source suggesting the company is likely to have secured a "significant rent-free period".

This rate is fractionally below the current prime city centre values for new leases, which have slumped to €495 per sq m (€46 per sq ft) at the IFSC from a high of €602 per sq m (€56 per sq ft) three years ago.

Google's decision to base its first operations centre outside the US in Dublin was lauded as a massive coup for the country's digital and media industry by the Tánaiste and Minister for Enterprise, Trade and Employment, Ms Harney in March last year.

The technology firm is one of the few internet success stories with many investors anticipating a Wall Street bonanza if it floats on the New York Nasdaq later this year. Founded by two Stanford University graduates, the privately-owned company has promised to create over 200 jobs in Dublin and, despite the delay in selecting its European headquarters, recruitment for sales, technology and administration staff has been underway since its arrival here in April 2003.

Google, currently occupying short-let offices on Earlsfort Terrace, is expected to move into its new HQ at the end of the year. The Gasworks is described by its commercial letting agent,

CB Richard Ellis Gunne, as one of the "largest and most ambitious speculative schemes undertaken in the city". Opposite Grand Canal Dock DART station, it will have 17,565 sq m (189,000 sq ft) of office space, 600 apartments and shopping facilities.