Commercial property landlord Hibernia Reit expects demand for city centre office space — particularly in the capital — to continue and accelerate, with the disruption caused by the Covid-19 outbreak only being “a speed-bump”.
The company’s CEO Kevin Nowlan said the near-term outlook for the commercial property market is negative, with the full Covid impact on rental and property values “yet to be felt”.
He said there may be an initial decline in office demand but that long-term demand is not in danger, while it may take 12 to 18 months to determine the pattern of commercial rent activity.
Mr Nowlan said Hibernia is well-positioned to survive any negative value impact and could withstand a 65% fall in asset values and a 76% fall in underlying earnings.
The company has seen virtually no impact on rent collection levels, with 93.5% of commercial rents already collected for its first quarter, which runs to the end of June, and 97% of residential rent collected for May. Hibernia expects a 95% to 96% collection rate for commercial rents for the quarter.
Mr Nowlan said office deals are still happening — with around 150,000sq ft of office space being leased in Dublin since the Covid restrictions were introduced in March. For its part, Hibernia successfully rented out part of its Cumberland Place block in Dublin — which also houses Twitter’s Irish headquarters — to technology giant 3M since the lockdown.
While Hibernia has a small exposure to residential property, 90% of its business is focused on city centre Dublin office property. That model will not change, with Mr Nowlan ruling out Hibernia looking at other Irish cities due to a low level of city centre residential living.
He said Hibernia is benefiting from having many of its buildings occupied by companies in the technology, media, and telecommunications sectors, who are not suffering major financial impact from the Covid-19 restrictions.
Hibernia said its after-tax profits halved, to €61m, in 2019, but its portfolio value jumped 2% to €1.46bn and its net asset value per share increased by 3.5%.
Mr Nowlan said the company is not considering the purchase of any new sites in Dublin, but will redevelop some of its existing properties as it focuses on producing income.
Meanwhile, Hibernia’s peers in the UK are feeling the heat. Shopping precinct and office owner British Land has conducted a series of rent deferrals and cancellations to help the company and its tenants ride out the coronavirus crisis, it said after annual losses soared to £1.1bn (€1.2bn).
With the pandemic having shut thousands of shops and forced some chains into administration, the firm said the value of its retail properties had slumped by 26%.
Rival Hammerson— which owns the Dundrum Town Centre in Dublin — said its CEO David Atkins will step down, as it faces a crisis spurred by coronavirus-induced shop closures and a collapse in rent.