Friday 23 February 2018

Oversupply of offices will not happen, say Hibernia

Twitter is set to take space in Hibernia Reit's Cumberland House in Dublin 2
Twitter is set to take space in Hibernia Reit's Cumberland House in Dublin 2
Peter Flanagan

Peter Flanagan

The head of one of the leading property firms in the country has dismissed concerns about a potential oversupply of office space in the Dublin market in the within the next three years.

Hibernia REIT chief executive Kevin Nowlan told an investor conference in Berlin that he doesn't "see a big oversupply coming down the line because it's just not happening on the ground".

While there is shortage office space in Dublin at the moment, and that has pushed up rents sharply, there is an estimated 5.5m sq ft of office developments planned. That is equivalent to about a quarter of the current market.

Average rents in central Dublin are at about €52.50 per sq ft at present. That is expected to rise to €70 next year before the new supply comes onstream. That new supply will likely drive rents back down, however.

Last week another property firm, Green REIT, flagged this coming supply as a possible concern. However at a round table discussion at the EPRA property conference in Berlin, which included Green's Caroline McCarthy, Mr Nowlan played down that concern.

In an at times testy discussion, Mr Nowlan said, "I don't believe that you will see that supply of space coming into the market".

"You will see the main players dripping supply, you will see a lot more pre-leasing, and speculative development will be very much targeted at the core areas of Dublin," Mr Nowlan added.

Ms McCarthy responded that that was a "blue skies" outlook.

Mr Nowlan however was adamant that there was no need to worry about a possible oversupply into the Dublin market any time soon.

"At the moment in Dublin there is about 1.9m sq ft under construction in Dublin of which over a million sq ft has been taken up.

"You are seeing a very delayed response [to the shortage], and a number of developments have got into difficulty on the funding side.

"Union, a very conservative German fund, has done a forward acquisition in Dublin so they seem to think it is a very secure market.

"The other thing is getting your hands on land in the city is difficult.

"The last thing is we now have upward and downward rent reviews.

"The bank funding that will come and it will eventually be domestic banks and they will be extremely worried about the value of their assets. The last thing they'll want to do is oversupply the market and devalue the assets," Mr Nowlan added.

HIbernia bought the Dublin office block Cumberland House for €49m last year, that property is now likely to be leased to Twitter.

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