Dublin enjoyed an exceptionally busy 2015 – and the city continues to thrive in 2016.
PwC and the ULI’s 2016 Emerging Trends in Real Estate report puts the city in the top five property hotspots. And international and domestic property activity during the first three months of the year ensured delegates at last week’s Dublin Question Time were in good cheer.
And, for investment volumes at least, the second quarter could be even stronger.
Green Property’s Blanchardstown Centre is the headline asset on the block. Starting as a greenfield site and developed over the past 15 years, it includes 1.25m sq ft of retail and retail warehousing anchored by Dunnes, Debenhams, Marks & Spencer and Penneys. It is expected to draw bids of around €1bn (£800m).
If that changes hands, the full year could achieve a volume similar to 2015, with as much as €3bn transacting.
But none of the 150 attendees was in any doubt that the year will present challenges too: the risk of Brexit, the threat of office oversupply and the dearth of housing stock all weighed heavily during the hour-long debate at the Royal College of Physicians of Ireland.
Not everyone was convinced there was a risk of imminent oversupply. Roland O’Connell, chairman of Savills Ireland, warned that supply and demand trends just needed to be watched closely.
“I don’t think there’s any fear of oversupply in the office sector for the foreseeable future,” he said. “We can see what the potential supply is in the market, but it’s very hard to be sure what the demand is going to be.”
O’Connell added that the pipeline for new offices was overstated, with some ongoing projects replacing existing stock and pre-leasing agreements on others, meaning that present supply could actually be slightly behind demand.
Paul McDonnell, head of property finance at Bank of Ireland, said that the availability of development finance was so tight that the risk of oversupply was constrained even further.
Speculative development and readily available finance had led to poor decisions during the last boom, he said, but banks had learned from that experience.
Stephen Vernon, chairman of Green Properties, said there was “no sense of a wall of money for office development”.
But Vernon warned that the occupational picture was not as certain as some assumed. The likes of Google and Amazon may be as established a part of Dublin’s landscape as a utility company, but those following in their footsteps – the fast-growing tech companies, or “unicorns” [start-ups that are valued at more than $1bn] – might be more transient and could leave space unoccupied at short notice, he said.
And developers are right to be cautious in the medium term. Savills’ O’Connell said the danger of Brexit, the uncertain Chinese economy and the US elections could all lead to a sharp cut in demand for office space.
A lack of residential development also posed a real danger for the office market, according to the panel. As rents rose and workers struggled to find affordable places to live, Dublin was in danger of becoming less attractive to workers and businesses, warned O’Connell.
Andrew Gunne, chief executive of Chartered Land, said: “I think that Dublin City Council has gone some way to make it less expensive to build but it comes down to tax.”
VAT is still applicable on new-builds in the Irish market, which means that affordable housing schemes can often run at a loss, said the panel.
Until this changes, said Gunne, supply problems would get worse before they got better.
Issues around density were also raised by the panel, which claimed that the council was failing to address supply problems by preventing tower blocks of any type being built in the city centre.
“Inner city blocks, regular housing for regular people, is what we need,” said Green’s Vernon.
Ideally that housing should be built to rent, not to sell, he added, which would help make the schemes more viable.
But it was the consequences of Brexit for the Irish market that concerned many of the delegates at the event.
Chartered Land’s Gunne said the market would certainly be affected, but it would not be as bad for Dublin as it would have been 15 to 20 years ago. Since then, said Gunne, Ireland had become increasingly attractive to US investors.
For Vernon, Brexit was still a problem for Ireland, but he added that in the longer term it could actually be a positive for the country: with the euro as its currency and a legal system similar to the UK, Ireland could end up being a target for spooked investors.
Listen to the debate in full at www.libsyn.com/estatesgazette
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