Hibernia Reit says Brexit fears holding back Irish office investment

Fears of a no-deal Brexit have left Irish companies unwilling to spend on new offices, according to Kevin Nowlan, chief executive of Hibernia Real Estate Investment Trust (Reit).

The property investment group said on Wednesday that businesses leased more than 1.7 million sq ft of offices in the Dublin market during the first half of this year, although take-up in the three months to June 30th was slower than in recent quarters mainly due to fewer large letting deals.

Some 1.6 million sq ft of office space was leased in the capital during the same period last year.

Following Hibernia’s agm in Dublin, Mr Nowlan said Brexit uncertainty continued to push Britain-based and other overseas companies to locate in the capital, driving demand for offices. He agreed that the flip side of this was that it deterred Irish firms from expanding.

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Mr Nowlan said he knew of law, accountancy and other professional firms that were “out the door” with staff but not taking extra space because they feared a possible no-deal Brexit. “They do not want to make a big capital investment because of that nervousness.”

He added that if the UK agreed an exit deal with the EU it could spark a surge in demand for offices from these businesses.

Hibernia has begun engaging with South Dublin County Council on rezoning 92 acres at Newlands Cross in the capital's western suburbs that the company bought last year for €27 million. The firm wants to build offices, shops and homes on the site, which is the biggest vacant plot along Dublin's Luas tram network.

Mr Nowlan said the Government’s regional development strategy should speed up reviews of the council’s decision to reject proposals to rezone the land to allow residential building there.

City centre

Hibernia focuses mainly on offices in Dublin city centre. In a statement issued before its agm, the real estate investment trust said active demand remained high and that it expected to close a number of lettings in the near term.

“Office vacancy at the end of June 2019 was 5.9 per cent for Grade A space in central Dublin and 6.4 per cent for Dublin overall,” Hibernia added.

Hibernia Reit’s vacancy rate in its in-place office portfolio is 15 per cent, up from 12 per cent at the end of March following two tenants moving out of 19,000 square feet of space, as flagged in the preliminary results in May, and the acquisition of 10,000 sq ft of vacant offices.

"The majority of the available space is in the Forum, Central Quay and the recently completed 2WML," Hibernia Reit said. "Since March 31st, 2019, we have made good progress with leasing discussions: if all the space currently under offer completes, the vacancy rate in the in-place office portfolio will fall to 5 per cent."

Prime Grade A headline rents in the city centre for the industry are stable at in excess of €60 per sq ft, it said, citing Knight Frank data.

Hibernia Reit agreed eight rent reviews during the first half, increasing contracted rent by €1.7 million, with two rent reviews outstanding at the end of the period likely to add a further €1.4 million to its annual income.