As we endure the ongoing COVID-19 Health crisis, BNP Paribas Real Estate Ireland Director and Head of Land and Development Robert Lloyd gives us his observations and answers some of the more pertinent questions often put to him...
What has developers’ reaction been to the pandemic and what does this mean for land values going forward?
Overall, it’s been robust and progressive. The smart developers have been very active either buying sites or advancing projects. It’s like what Warren Buffet says, “I only buy snow shovels in July”.
Financing projects has been one of the main challenges, with many lenders slowing down or pulling back, affecting transaction volumes, which were down significantly in 2020.
However, there has been lots of activity throughout the year which we think we’ll see come through in 2021. The nature of property development typically means taking a 2 – 5 year view since that’s how long a medium scale schemes can take, much longer for larger ones. So, professional developers are used to looking around corners and dealing with bumps in the road.
Land values have remained stable generally, though there are numerous examples of off-market transactions at higher price levels than 2019, especially in the PRS sector which has and continues to perform very well.
If you had €50m to spend, what types of real estate would you buy and what sectors do you see being most active?
Any of the sites that I bought for our clients!
I would certainly buy in the PRS sector where we see great potential, including social housing backed by government income. PRS has performed really well in recent years and is now an established, institutional grade asset class. And while we’ve already seen some great schemes delivered, in relative terms we think it is still in the ‘start up’ phase of its evolution - improving all the time. Looking at the talent pool active in this sector and the pipeline of schemes being progressed at the moment, I think the development landscape in PRS is going to look even better in the coming years than it is today, as the next phase of projects is delivered.
We think the office market will bounce back too and re-establish itself - and we’ll see more office developments happen once we get closer to the vaccine and economic normality. Ireland has a fantastic record of FDI, reportedly receiving $75 billion in the first 6 months of 2020, more than China ($68 billion) and the US ($62 billion). We understand Bartra are going to start building their Boston Sidings office scheme in Q1 2021 which is very positive. Construction inflation has softened through 2020 and office occupiers will return.
How do you see Work From Home (“WFH”) playing out in future office developments?
This has been an active topic of conversation during the pandemic. However, we don’t see it being a substitute or replacement for the ‘traditional’ office. It’s not binary. Inevitably, there will be changes to the working environment but many of these were pre-existing, such as a more agile and flexible workforce, and employee health & wellbeing. We see office schemes of the future (as good as they are now) being a better, more refined version of what they are today, with an even greater focus on sustainability, wellbeing and technology in particular.
Aside from the creative combustion, and cultural benefits that traditional offices bring to the productivity of a workforce, the practicalities of WFH long term have to be thought out properly. Just because we’ve all ‘managed’ to work from home during the lockdowns, translating this to a long-term sustainable way of working has many challenges. For instance, fragmenting a workforce to their houses or apartments, say 20 kilometres apart has a lot of practical ramifications. Does it mean staff get salary rises to cover extra utilities bills, and for needing to rent or buy more space to create a home office? Also, the health & safety and insurance issues that could arise. And WIFI signals -we’ve all witnessed “Minecraft moments” on video calls during lockdown.
Looking ahead, what would you most like to see happen in the property development market over the next 5 years?
I would really love to see more transport infrastructure happen in Dublin City, particularly the LUAS and Metro, and get us closer to net zero carbon status - which will continue to be a very important theme in real estate throughout the 2020s. And I think the next 5 years would be a great time for the government to invest in this as we come out of Covid-19.
Focussing on Dublin City Centre, what do you see coming down the tracks?
We’ve been very fortunate to witness many great looking developments in Dublin City in the last 5 years - for instance, on the North & South Docks. But there are some very exciting projects underway in Dublin 1 & 2 at the moment which I think would really strengthen the City Centre and create a very vibrant environment for people to live, work and visit.
For example, Westridge’s Kevin Street scheme beside Stephen’s Green looks fantastic – it’s great to see prime new offices and apartments of this scale being developed so close to Stephen’s Green.
Likewise, I’m looking forward to the completion of Marlet’s College Square office and residential scheme in the heart of the City beside Trinity College; Ronan Group’s Aqua Vetro on Tara Street and Ballymore’s Connolly Quarter – 3 prime 20 storey plus developments to add to the City’s skyline, hopefully setting a precedent for many more.
Hammerson’s proposed Dublin Central development on O’Connell Street looks very promising. It would be great to see this and TCD’s plan for Trinity East / Grand Canal Innovation District take shape too – 2 more schemes that would give a nice boost to economic growth in the City Centre.
Combined, these 6 schemes could add about 350,000 sqm to Dublin 1 and 2 which would be a major catalyst for further economic activity.
Edging out slightly, it would be brilliant to see the controversial National Children’s Hospital finally complete. And of course, Ballymore’s Diageo redevelopment on James’ Street. These 2 projects would be a great boon for Dublin 8 and the City. Add in Chartered Land’s Parkgate Street scheme beside Heuston Station (at 29 storeys) and you have a great counterpoint to the City Centre.
It’s been a long time coming but it would be nice to see The Glass Bottle site take shape too. And having watched it progress every day, I’m very much looking forward to seeing Fibonacci next door to our current office in Ballsbridge reach it’s practical completion.
5 Years from now, if we can see these projects complete and thriving, I think Dublin City would be much the better for it, adding to the real international feel it has rightfully achieved in recent years.
So you’re positive about the future?
Well, as I said in my last newsletter during the first lockdown in May that “perspective is everything”. At that time, I mentioned that the availability of a Covid-19 vaccine is potentially 12 – 18 months away has to be borne in mind in forward planning or making decisions about future real estate developments. 6 months on, and with 3 vaccine trials showing promising signs of efficacy, it looks like we could achieve this timeline mid next year which would be a big and much needed boost to the economy.
Another big plus………… we now have a Ballina man in the Oval Office!