'Irish commercial property is a bubble. I actually think we’re overbuilding offices' – O'Brien
The Dublin office market is “a bubble”, says businessman Denis O’Brien in a warning that comes almost 10 years since the last crash.
And he issued another stark warning about Brexit – which he described as “Dunkirk without the ships”.
Any Irish business exposed to the UK must now plan for the worst, he said. His own Actavo contracting business has begun actively pulling back from the market there, he said.
“We didn’t renew contracts that came up in the UK for Actavo – the margins are slim and growth there is supposed to be 1pc but the UK economy could go down 5pc,” he said.
His own experience of previous crashes – in 2000 and in 2008 – is one reason he is now wary not only of Irish commercial property but also of global stock markets which are sitting at all-time highs, he said.
He made the comments in a wide-ranging interview at the World Economic Summit in Davos. The Irish businessman has been a regular at the event in the Swiss resort for 18 years, mixing business meetings with seminars – including one yesterday on Fake News and others on technology.
“If you come here, it’s a crossroads, it saves a lot of travelling, that’s the way I look at it. I had lunch with Bill Gates earlier, am going to a thing about empowering women managers in emerging markets, I’ll go to all sorts of things,” he said.”
But he now believes the event has limited impact in the wider world.
“If you look at it from a social point of view Davos doesn’t really achieve anything, to my mind. People come here and make a lot of speeches about the great divide – the poor versus the wealthy – but it doesn’t translate into, really, any concrete actions coming out of Davos at all,” he said.
Optimism on that score had been sapped in part by the election of Donald Trump, who he said has no interest in Africa and little interest in the rest of the developing world.
Mr O’Brien’s main business, Digicel, operates across markets in the Caribbean and Pacific, including Haiti and El Salvador, which were among a number of countries insulted by the US president in recent weeks.
Haitian president Jovenel Moise, who Mr O’Brien met earlier in the week, had been right not to respond to the Trump insult, he noted. In Haiti the Digicel Foundation opened a new school this week, the 176th it has built in the country.
But Mr O’Brien said countries like Haiti need the West to step up with a longer term financing model if they’re to emerge from poverty.
At home though, Mr O’Brien’s status as the country’s wealthiest businessman and as an investor in the past in commercial offices, means his comments on the property market will catch huge public attention.
“Irish commercial (property) I think that is a bubble,” he said.
“Every time I come back to Dublin I’m staggered because there is a new crane going up for some new development and now a lot of these office developments are being funded by hedge funds with very expensive money – 12 to 14pc (interest rates) money – with an Irish developer mixed in to it.
“I talk to all the property guys and they all say – ‘No, you’re wrong Denis’, but I actually think that we’re over-building offices and there won’t be enough people to put in them. If you look at artificial intelligence and the way the world is going there will be less of a need for work places.”
In contrast, he said Irish housing is probably good, as an investment, in the medium term.
One reason Dublin developers are building too many offices is in anticipation that banks will leave London as a result of Brexit, he said.
“Everybody thought, or bought into the idea or the notion that a lot of the banks would move from, you know, from London and Canary Wharf to Dublin. But the Central Bank doesn’t have the capacity or doesn’t want these banks to move over. A bank could move a trillion dollar balance sheet to Dublin but the Central Bank doesn’t have the people to regulate it, so that silver lining (in terms of Brexit) of those jobs won’t happen.”
Smaller and more niche firms might come, but won’t need huge offices, he said. “There could be fintech jobs or other financial services that are less dependent on regulation that could come to Dublin but you are talking about a huge supply of brand new office space, so you know…”
On Brexit, the businessman singled out Foreign Affairs Minister Simon Coveney for particular praise, saying he’d “played a blinder” in pre-Christmas talks. That was in marked contrast to his view on Communications Minister Denis Naughton.
“I don’t think he gets it. On his watch, potentially, there’ll be no Irish-owned media companies in the country – except for RTÉ,” Mr O’Brien said.
Two companies (Google and Facebook) now control 80pc of online advertising in Ireland, he said. In Germany and France, and increasingly elsewhere, policy makers are pushing back against the power of social media giants, seeing a direct electoral threat and a threat to the media, he added.
As well as Communicorp, Mr O’Brien owns a stake in Independent News & Media (INM), which publishes this newspaper.
“I don’t think the Government has any policy whatsoever on Irish media, on newspapers, on radio; and the problem is Ireland – if Ireland takes a strong line on Facebook they are putting a finger in the eye of one of the biggest foreign direct investors so that’s an issue as well that’s the backdrop.”
Elsewhere though, a shift is underway, he said. “I think there is going to be a lot of regulation coming down the track. I think there is a mood about it.
“Rupert Murdoch said the other day that Facebook should go to news providers, to newspapers in fact and partner with them. It is quite an interesting thought because newspapers for the most part are seen as reliable providers of news and commentary,” he noted. “But unless something happens, it’s just going to be catastrophic.”