Forget Fears Of Big Brexit Losses To Dublin

Is Dublin — with the same language and time-zone benefits as London — shaping up to be the single market destination of choice for London occupiers spooked by Brexit?

Dublin attracts thousands of Londoners each year — particularly to its nightlife, but if you read the Irish press in the last few weeks, you might think Dublin is stealing office market activity from London. Recent deals claimed to have a strong Brexit link include insurance companies XL Group and Royal London and U.S.-based Kroll Bond Rating Agency.

But read a little closer: XL was, until a recent corporate restructure, Dublin-based from 2010-16, and the Royal Insurance move will not necessarily move any jobs or square feet.

There certainly are big Brexit moves afoot — not least JPMorgan Chase & Co.’s $137M purchase of 130K SF at 200 Capital Dock — but CBRE Dublin Executive Director Paddy Conlon said calculating the overall market impact of Brexit is not easy and probably is not as large as the hype suggests.

“We’ve seen 150K SF from larger deals in Dublin, another 150K SF signed in smaller deals, and from discussions currently underway you might expect another 100K SF before the end of 2017,” he said.

According to JLL’s Dublin Office Market Q2 data, the city is heading toward more than 3M SF of take-up in 2017, making Brexit-related deals more than 10% of the year’s total. That is significant, but not overwhelming, agents said. The market is largely driven by tech-sector growth, not by Brexit.

Conlon said the market view is that whilst many potential Brexit movers are looking at Dublin, many more are merely testing the water.

“Those who haven’t done anything yet — signed anything yet — are playing a more cautious game,” he said.

Peter Oakes — FinTech guru, Brexit opportunity promoter and a former director at the Central Bank of Ireland — said whilst Brexit interest is real, it is easy to overstate.

“Ireland is getting a second look from occupiers, not more than other jurisdictions, but nobody is packing up their bags in London and moving to Dublin. After Prime Minister Theresa May’s speech in Florence, saying there will be access to the single market for another two years, why would they?” Oakes said. “Unless your business is in the insurance sector, or you need the protection of a new jurisdiction as banks might, or is an oil tanker that takes years to turn round, there no need to make a move.”

Oakes pointed to the raft of European HQs in Dublin — from Google and Facebook downward — noting that whilst they are domiciled in Ireland, they generally have larger headcounts and floor space in the U.K. He said it is important to separate the background noise about Brexit from the real decisions. Those who look, and those who execute after they have looked, are two different groups, and the first is much bigger than the second.

In London the mood is calm and upbeat. Colliers International Director of Research and Forecasting Guy Grantham said, “As a consultancy, we’ve seen two euro-broking business shut up shop entirely because of Brexit, but their occupancy is less than 20K SF and I’d be very surprised if the overall loss to Brexit so far in London reaches 100K SF.”

Grantham said rolling analysis of London’s grey market for surplus office space would be the obvious place to look for Brexit bad news — and despite searching, he cannot find any.

“There’s about 2.5M SF in the London grey market, but it’s all due to mergers, acquisitions, administrations, efficiency savings — and we’re not seeing any Brexit effect,” Grantham said.

The last week of Brexit maneuvering — including May’s Florence speech and the latest round of Davis/Barnier negotiations in Brussels — make the likelihood of Brexit floor space losses even more remote, JLL London Director of Office Research Ben Burston said.

“There will be firms sounding out their options — of course, it is only natural to assess options in other cities — but our sense is they won’t be doing anything dramatic. And as the possibility of a transition period gets closer that assurance allows them to kick the can down the road a little further.”

The City of London is preparing a way ahead. The City Corp. — the Square Mile’s local government — is studying a new strategy for post-Brexit life prepared by the International Regulatory Strategy Group, which represents the U.K.’s financial and related professional services sector.

IRSG's Brexit blueprint, published this week in collaboration with international law firm Hogan Lovells, is based on regulatory alignment between the U.K. and EU with both parties working together to implement new global and international standards.

“While we may see some jobs move to the continent, we are not expecting a mass exodus to Europe provided Brexit is handled carefully,” City of London Corp. Policy Chairman Catherine McGuinness said. “However, the main beneficiaries of Brexit — if any — are likely to be other international hubs, such as New York and Singapore.”

The real effects of Brexit on both Dublin and London are open questions. Anecdote is still the main currency, and hard data scarce. But the office market evidence so far suggests modest but real benefits for Dublin, and barely noticeable pain for London.