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EXCLUSIVE: Aviva’s Suzie Nolan On Dublin Office Outlook And Why Retail Is Back

Aviva Head Of Property Ireland Suzie Nolan is fed up with the negative sentiment around Dublin’s commercial office space.

Far from being a tale of doom and gloom, she said that the market will begin to unlock in the second half of 2023, when the level of transactions rises enough for investors to gain a better feel for valuations.

And in 2024, she told Bisnow in an exclusive interview after the Bisnow conference on 4 May at EPIC in the city’s Docks area, she said that she anticipates a much stronger investment sector driven by demand from a more diversified occupier base.

Nolan sits at the helm of one of the biggest real estate investors in Ireland, the Aviva Irish Commercial Property Fund — a fund that in 2020 combined the company’s two previously separate funds. It invests in a range of Irish properties across the retail, office, industrial and alternative sectors. At the end of 2022 that included 62 assets valued at around €620M.

After combining its two funds, Aviva has diversified across assets in Ireland.

“Clearly right now the market is suffering from a whole range of challenges including the ongoing impact of the pandemic, inflationary pressure and high interest rates. If we see these stabilised, then I think we may see quite a strong second half to 2023.”

She believes that the key difference compared with previous market corrections and downturns is that there are few forced sellers and that vendors can afford to hold assets and wait for more positive sentiment.

“If we compare now with 2007-2008 then we have to remember that debt was at all-time high, which is not the case this time round. As we see the first transactions in the second half of 2023, those are likely to set the tone for the rest of the year. And then we’ll see the valuations and we will have more context for the market,” she said.

“So I would expect movement to begin in the second half of this year and then in 2024 we’ll see the market at a fresh starting point.

“One of the things that makes me feel optimistic is the Irish economic backdrop. Despite a lot of negative media, unemployment remains very low and there is hiring across sectors outside technology. So what we’re seeing is occupier demand from a more diverse set of corporates. Clearly there are challenges, and I’m not being rose-tinted about this, but there has been too much negative sentiment,” Nolan said.

Upgrades: Sustainability And Beyond

Like many owners in the Dublin market, upgrading existing assets to meet ESG standards will be a significant undertaking for Aviva over the coming years.

“We’re constantly looking ahead at how we can improve our existing commercial real estate and over the next three to five years there will be a focus on retrofitting and refurbishment as we aim to bring our portfolio up to Grade A office spec," Nolan said. "Our assets are very well located, so we have the location and the infrastructure, it’s a question of ensuring that the investment makes sense,” she said of the strategy to upgrade the existing stock.

“We’re also looking at the feasibility of how we not only upgrade but add to our existing properties, whether that’s bringing in residential, hotel space or ground-floor retail,” she added.

Nolan is in no doubt that older office space needs to be brought up to contemporary energy-efficiency standards, despite mounting industry concerns about whether landlords will see the return on some buildings they upgrade.

“Although the costs can be high, I genuinely believe that if we can unlock the embedded value in existing assets then that makes sense in terms of both the business and sustainability,” Nolan said.

“I also think that local authorities are proving that they will be more helpful and more flexible if you can demonstrate that you are taking a sustainable approach and that you will be bringing assets up to a certain, modern standard,” she added.

“In addition, if the conversion adds any kind of residential component then you have a slam dunk.”

Nolan also said that Dublin landlords need to think beyond the environment and sustainability, as the demands from occupiers and corporate stakeholders extend far beyond energy ratings.

“We always tend to focus on the E of ESG, but the S is very important," she said. "As a landlord of 62 commercial assets, giving back to community and using vacant space for local benefit is very important. For example, we’re just about to hand over the keys to Clarendon Street for Dublin Pride at a significant discount to market value as a city centre hub for the organisation.

Retail Recovery: From Parks To High Streets

Aviva's Suzie Nolan (second left) is bullish about Dublin's retail and offices.

She is also bullish about retail, echoing more general sentiment across Europe that retail real estate has price-adjusted and that the market has endured the pain of transition into an omnichannel sector, with most of the weaker retailers now downsized or out of business.

“There’s no doubt that retail is looking more favourable. We’ve always been very positive about retail parks and they almost feel like a separate sector, because rents and yields are very different from the high street or shopping centres,” Nolan said.

“We completed a major €10M overhaul of Blackrock Village [previously Blackrock Shopping Centre], bringing in lots of food and beverage and services such as a dentist, a pet shop, more services to create the right mix. But you have to be careful. We could have signed up three nail bars, but that’s not what the centre needs, so you have to asset manage carefully,” she stressed.

However, Nolan said that “the story on retail is broader than this” as she pointed to a recovery in the city’s prime high street retail space.

Henry Street and Grafton Street vacancies are way down and although some soft deals have been done, again I think that the Dublin market is in a much stronger position than it was during the previous downturns.

"We were very exposed to UK subsidiaries of retail chains and because of the UK’s CVA rules, they were able to close Irish stores as part of their restructuring. Now Dublin’s retail base is far more international and UK retailers only represent about 20% of the total retail space, so there’s not the same exposure,” she said.

“Since the pandemic we’ve really seen the high street come back and there’s a much better outlook now for the sector.”