In his opinion piece on Tues, 3rd April in the Irish Times, Kieran McGowan of Property Industry Ireland makes the case that to attract FDI there needs to be investment in the commerical property sector: “Without the accommodation, we won’t get the FDI.” His argument is that: “There is a view that there is an overhang of completed buildings across all parts of the property sector. This is wrong, particularly in relation to buildings for firms entering the market in key urban centres throughout Ireland.” He does not provide one piece of data to support this view, only assertion. The reason for this is that the data available tells a different story.
Savills ‘Dublin Office Market in Minutes’, Q3 2011, report notes that 23% of Dublin office space is vacant. In the prime locations of Dublin 2 and Dublin 4 the vacancy rate is 16.1% and 23.5%. Moreover 18% of vacant offices are defined as Grade A. To put this in context, the amount of empty office space in the city is equivalent to over 200 Liberty Halls (also see the Andrew MacLaran’s post on IAN on the Dublin office market).
The Society of Charted Surveyors Ireland recently reported that the office market had little to no activity with rents/yields falling. The same was true of the industrial and retail sectors, both with large volumes of excess stock. In fact, they report that the only part of the property market that is functioning near to normal is agricultural land.
This is the industry’s own data and is reflective of patterns nationwide.
Whilst I agree that the strategic use of construction will help Ireland recover from the present crisis – particularly in relation to public infrastructure that will serve the general population and industry – we need to be careful not to misrepresent the true nature of the dire position of the Irish property market and the levels of oversupply within it across all sectors. There is plenty of office stock to deal with most of the needs of FDI, with some minor strategic investment in upgrades or new build (we only need to build new stock for specialist facilities or where the investment is so large that there is no suitable existing empty office space – in both cases this will be for a handful of companies).
As with the housing market, there is a need to harmonize the supply and demand of commercial property in order to reduce oversupply and put a floor in the market. Unnecessarily building new stock will work to keep the market either falling or flat.
Moreover, rather than overly relying on FDI to get us out of our present slump we urgently need to grow Ireland’s indigenous sector – the sector we should have been investing in when we were ploughing billions of euro into property speculation. They are our ideal tenants of the future.