Trump brings fresh uncertainty for real estate sector in wake of Brexit
The potential consequences of Donald Trump's election as US president for the Irish economy may remain to be seen, but the fresh uncertainty it has created is unwelcome to say the least for a commercial property sector that is still seeking to come to terms with the potential impact of Brexit.
Indeed, the ink had scarcely dried on two reports on the outlook for the Dublin office market, issued separately by agents Savills and CBRE, last Thursday morning before Trump's economic adviser Stephen Moore vowed in the course of a BBC radio interview that the US would cut its 35pc corporation tax rate to as low as 15pc in a bid to lure American multinationals home from Ireland and elsewhere.
While Goodbody senior real estate analyst Colm Lauder had noted within hours of last Wednesday morning's confirmation of Trump's US electoral victory that the occupier base in Dublin's docklands is "highly skewed towards US multinationals", with Cushman & Wakefield estimating it to be as high as 41pc, both Savills and CBRE's focus understandably remained confined to the 'known unknown' of Brexit and how Dublin might meet the demands of companies seeking to relocate here from the UK.
Savills' 'Skyline Survey' reports that 136 office buildings with a combined floor area of over 12 million square feet and with the capacity to accommodate over 100,000 office workers are being planned for Dublin between now and 2021.
A further breakdown of the figures shows that 39 new office developments are currently under construction in Dublin, 13 of which have pre-commitment from a tenant to take space. A further 62 developments have received planning approval but are not yet on site, while 35 are in the planning stages. The Skyline Survey notes that the majority of these projects (34) are taking place in Dublin's central business district (CBD) of Dublin 1, 2 and 4, with most of the development accounted for by new builds, with refurbishments and extensions making up over 18pc of the pipeline. The replacement of existing buildings is set to account for an additional 39pc.
Savills acknowledged that not every one of the 136 developments will proceed, concluding that the delivery of even half of the projects being proposed currently would be sufficient to cope with the potential demand arising from UK companies seeking to relocate their operations to Dublin in the wake of Brexit.
Meanwhile, CBRE focussed its analysis of the Dublin office market and its capacity to meet the potential demands presented by Brexit to schemes already under construction in the capital or with planning permission in place.
According to its latest 'Dublin Office Supply Update', there was almost 285,000 sq m (1.65 times Dublin's annual average take-up) of office accommodation available to let in Dublin, excluding those buildings that are already reserved at the end of the third quarter.
This, according to CBRE's director of research Marie Hunt, contradicts the view that there is no office stock available to let in Dublin presently.
Referring to that misconception, Hunt said people's perceptions had been "heavily skewed" by focussing on the Dublin 2 and Dublin 4 districts where the vacancy rate of Grade A accommodation is just over 2pc, or only approximately 31,500 sq m, at the end of Q3 2016. Quite apart from the vacant stock in the market presently, CBRE notes that there is 372,637 sq m (4 million sq ft) currently under construction in the city centre in 29 individual schemes, of which 22pc is currently reserved.
The 372,637 sq m of new office accommodation already under construction in Dublin city centre equates to just over two years' supply, CBRE says, and will add approximately 10pc to the city's stock of office accommodation.
This, according to Hunt, compares favourably with other cities that would typically compete with Dublin from an office occupier viewpoint.
A further analysis of the office space now being developed in Dublin city centre shows that 19pc of it is due for completion in 2016 with a further 56pc due for completion in 2017. Some 16pc of the stock that is under construction and due for completion in 2017 has already been pre-let. This proportion of pre-letting is expected to increase over the coming months as other large transactions sign.
While CBRE expressed its satisfaction with the level of office accommodation under development and coming on-stream, they are concerned with the supply of housing for the workers who might occupy it. Hunt said: "The bigger issue for Government to tackle at this juncture, and which to be fair is already being addressed, is to ensure that there is sufficient housing and adequate infrastructure to facilitate this additional demand, if and when it materialises."
Savills expressed concern that the supply of new office accommodation is being constrained by available equity and debt funding, notwithstanding the ongoing demand/supply imbalance.