Wednesday 17 October 2018

Dublin could benefit from 'second wave' Brexit-related relocations

Pre-tax profits rose 118pc at Kevin Nowlan’s Hibernia Reit
Pre-tax profits rose 118pc at Kevin Nowlan’s Hibernia Reit

Ronald Quinlan Commercial Property Editor

The chief executive of Hibernia Reit, Kevin Nowlan, believes there could be a "second wave" of Brexit-related relocations to Dublin if it becomes apparent that the UK's efforts to negotiate an acceptable exit from the EU have failed.

Mr Nowland was speaking to the Irish Independent following the publication yesterday of Hibernia Reit's latest set of interim results.

He said he viewed the major Brexit relocations announced so far by JP Morgan, Bank of America Merrill Lynch and Barclays Bank as "hedging to cover the bases if Brexit goes horribly wrong".

He added: "I think there could be a second wave of people coming if it becomes apparent that this is going to be a very hard Brexit.

"If they [UK-based companies] know that this is going to have a long-term impact, they will need to set up very big operations within the EU."

The Hibernia Reit chief said the possibility of such a 'second wave' of post-Brexit relocations could account for the space now being taken up by fintech and tech companies in Dublin.

On this, he said: "They may be saying 'we need to take space now because in a year there could be a real wave of demand that drives rents higher.

"The other thing is the level of delivery [of new office space] is actually slowing." Regarding the Government's decision to increase the rate of stamp duty on commercial property transactions from 2pc to 6pc, he said: "Stamp duty had been reduced to 2pc for a reason. It was because we were trying to attract international capital into Ireland - 2pc was low from an international base. The average internationally is about 5pc to 6pc for commercial property."

Read more: BoE's Carney wants Brexit transition deal as retail wanes

He added: "I do think the industry got caught a little bit by surprise, but when you look at it, you say 'well you know this was kind of inevitable at some stage'.

"Who might be annoyed? Well anybody who's bought in the last few months, but anybody who bought three or four years ago has done very well as the valuation impact hasn't been massive. Any new capital coming in will just factor it into the deal. From a net perspective, it has no impact on them. The value of the property just gets reduced by that [extra] 4pc."

In its latest results covering the six months to the end of September, Hibernia Reit reported pre-tax profits of €70.6m, up 118pc on the same period last year.

The company declared an interim dividend of 1.1 cent per share, which was up over 46pc on the 0.75 cent per share last year. The value of its property portfolio rose by over 5pc to €1.266bn in the six month period, while net rental income rose by 31pc to €21.9m from the same time last year.

Irish Independent

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