Commercial property group Hibernia Reit said activity in the Dublin office market would probably be affected in the near term by the Government’s latest advice for people to work from home where possible to try and rein in high levels of Covid-19 infection.
However, the company's chief executive, Kevin Nowlan, said the impact would be less than seen at the height of the coronavirus crisis.
“I think most companies are going to look at the current situation as a lot more temporary than what we’ve had to deal with before,” Mr Nowlan said, after Hibernia Reit reported results for the six months to September, noting that vaccine boosters were being rolled out and anti-viral drugs developed.
“It does appear that we are at the beginning of the end of this. It’s clear that most people that worked in offices are going to go back – with most companies taking up a hybrid working model.”
Hibernia Reit, which owns €1.45 billion of mainly office property in Dublin, reported in March, that it was seeing the first signs of a recovery in active demand in the market, following a 30 per cent fall-off in letting requirements between February and December last year.
“Our active demand tracker, run in conjunction with Cushman & Wakefield, stood at 2.7 million square feet (250,838sq m) at the end of March 2021. Since then, active demand has risen as restrictions eased, reaching 3.5 million square feet at the end of August 2021,” it said in its interim report. “At the end of September 2021, active demand had fallen back to 3.0 million square feet, mainly due to a number of larger requirements being satisfied.”
Mr Nowlan said corporate tenants were becoming increasingly conscious of the sustainability credentials of buildings they plan to rent. “There’s going to be winners and losers post-Covid in the office sector,” he said.
The company sold its Dockland Central building, one of its less energy-efficient properties, for €152.3 million last month. Part of the proceeds are expected to be recycled into delivering more environmentally friendly developments, such as its 31,308sq m (337,000sq ft) Harcourt Square project in Dublin 2, which it is in advanced discussions to let to accountancy firm KPMG.
The six months to the end of September also saw the company complete its 2 Cumberland Place and 50 City Quay schemes in the capital, delivering 5,806sq m (62,500sq ft) of new office space.
Hibernia Reit’s office vacancy rate increased to 11 per cent in September from 7 per cent in March, following the completion of the new developments. It said the rate was expected to reduce “in the near term”.
The company's net asset value per share, measured on a basis set out by the European Public Real Estate Association (EPRA), stood at 175.5 cent at the end of the reporting period. Goodbody Stockbrokers analyst Colm Lauder said this was ahead of his 170.5 estimate, aided by a 0.4 per cent overall increase in capital values.
EPRA-based earnings per share, at 3.2 cent for the six months, were also ahead of the analyst’s 2.8 cent projection.
“The wider Dublin market is not without its challenges, but a high-quality, energy efficient portfolio continues to mitigate such risks, and this is evident in Hibernia’s return to growth in [the first half],” Mr Lauder said. “Growth will be enhanced through its ambitious, and increasingly de-risked, development pipeline.”