Monday 24 October 2016

Dublin office shortage means City firms will not move here

Published 24/05/2015 | 02:30

Canary Wharf in London. Several firms have threatened to leave London if the UK exits the EU but they cannot move to Dublin because of the lack of office space
Canary Wharf in London. Several firms have threatened to leave London if the UK exits the EU but they cannot move to Dublin because of the lack of office space

Ireland will miss out on thousands of financial jobs if Britain exits the EU, because the lack of office space and high rents will put off many companies relocating here.

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The UK government has pledged to hold an "in or out" referendum on the country's membership of the European Union by 2017.

However that referendum has prompted several financial houses to warn they will relocate at least part of their operations - and the jobs that go with them - to another location within the EU if a so called "Brexit" does take place.

Deutsche Bank the euro zone's second largest bank by assets, confirmed this week it was considering cutting its UK operations if the country pulled out, and other big global banks are expected to rethink the scale of their UK operations under such an eventuality.

But Dublin is not an easy option for any substantial future move either, having seen the largest annual increase in prime office space occupancy costs - a proxy for demand - worldwide, recording a 34.9pc rise year-on-year in 2014, CBRE said.

Just 1.8pc of the city's total Grade A office space - prime real estate in its two best postal districts of Dublin 2 and Dublin 4 - was available to rent at the end of the first quarter 2015, further data from the real estate advisor showed.

That 1.8pc vacancy rate drops to zero in practical terms, and with workers becoming less and less willing to commute to business parks in the suburbs where space is plentiful, the shortage in central Dublin has become acute.

While there are offices being developed in the heart of Dublin, most of them are at least 18 months away from completion, and as a result rents are already pushing levels last seen at the height of the Celtic Tiger.

As a result, says Savills' head of commercial research, Mat Oakley, many of his financial services clients have suggested they are likely to leave the bulk of their operations in place whatever the referendum outcome.

"The practicalities of hiring or moving 1,000-5,000 staff to comparatively small markets in Ireland, France or Germany were so spectacularly difficult, they couldn't envisage moving lock, stock and barrel," he said.

"None of the major European cities could cater for that kind of demand at the click of fingers or even with six months notice," said Mr Oakley.

"The markets across Europe are pretty tight in terms of vacancy rates and lenders are so risk averse in terms of speculative office development that a bank would have to do a pre-let (commit to rent a property before it has been built), or buy a site," he said.

London was home to 143,500 banking professionals at the end of 2014, according to lobby group TheCityUK.

Office occupiers in the UK capital typically allow 11.3 square metres per workstation, according to the British Council for Offices.

London based banks tend to occupy this size of space in large buildings where trading and lending teams can work in close contact. So if they wanted to move 100,000 of staff out of London, they would need to find 1.13m sq m of equivalent prime space elsewhere.

"It's not as binary as just simply moving out of the UK altogether," said one investment banking source speaking on condition of anonymity.

"There are many reasons why banks are in the UK. Their clients are here, it has the biggest stock exchange in Europe. It's not all or nothing."

France's Societe Generale has also signed up to a 25-year lease on 26,000 sq m of offices currently under construction in Canary Wharf. The bank is due to move in 2019.

JPMorgan meanwhile, which employs around 19,000 people in the UK including 11,000 in London, says it has no special task force in place to consider what an exit from the EU would mean for its British business.

Perhaps some remember a previous move away from London made by several major hedge funds in 2009. They included Brevan Howard, which moved its main office to Geneva as tax rate hikes and tighter EU regulations loomed.

Three years later, however it was on the hunt again for properties in London. Hedge fund industry sources said the plan suggested some traders were missing the city's buzzing night life.

"We could move our HQ wherever we want," said one senior investment banker who spoke on condition of anonymity.

"We would never do this as London is a market that allows you to attract talent. If you want to be close to the action, you have to be in London." (Additional reporting by Reuters)

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