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.
Rob Kitchin
Ireland after NAMA 
April 6, 2012 at 1:28 pm
Rob, last year there was a blogpost on the mysterious absence of foreign investors in Irish commercial property. This was part 1.
http://namawinelake.wordpress.com/2011/09/05/why-don’t-international-investors-buy-irish-property-part-1-of-2/
Part 2 was intended to explore the reasons why Ireland, a country with an evolved democracy, a perceived low corruption and honest and open economy never, NEVER attracted substantial international investment, unlike most other countries where trans-national investment is commonplace.
The reason Part 2 was never published was that no international investor was willing to comment on the record – mostly because they’re all running the rule over Irish property at present, particularly with NAMA -but the general view seemed to be that Ireland suffered from a property sector – domestic investors, landbank owners, property companies, public records, associated professional services, banking, planning, political favoritism – which was impenetrable to outsiders, or at least expensive to compete with.
And that planning in Ireland was particularly capricious, and this from people who would be familiar with the murkiness of Spanish, Polish, Hungarian, Bulgarian, Italian and even British and American planning. Good to see we’re world leaders at something!
But if we have been unable to attract substantial foreign investment in the depressed punt-era 1980s, the nascent Celtic Tiger 1990s, the euro-era 2000s with the crazy boom, then why do we think we can attract it into property now?
April 15, 2012 at 1:00 pm
On Page 202 of Breakfast with Anglo Simon Kelly states that in twenty years in the commercial property sector he never once saw an international investor so it is highly unlikely we will see one now given that the country is bankrupt unless they are giving it away for free.
August 21, 2012 at 9:59 am
[…] Dublin are vacant, over 20% of office space is vacant (some 700,000+ sqm) (see our posts here and here for more info). In some parts of Dublin the vacancy by space is well over 40%. One way to look […]