Dublin may face strong competition from Belfast

DUBLIN'S commercial property sector could face stiff competition from Belfast if the IRA ceasefire is restored, according to a new study of both markets.

Belfast has a superior infrastructure, an abundance of development sites and lower costs and rents. Dublin, by comparison, is hampered by a "creaking" infrastructure, a shortage of sites and higher costs and rents, according to Ian French, of Hamilton Osborne King.

He told a press briefing for Belfast and Dublin journalists that international companies setting up new operations frequently opted for cities with low costs.

He said despite recent political setbacks, the Belfast property market was still performing well. Should political stability return, this market was likely to experience even more rapid growth over the next two years.

Even without a ceasefire, the indications were that Belfast would continue to produce returns at least the same as Dublin.

The study by HOK and its sister company in Belfast, Osborne King and Megran, shows office rents are significantly higher in Dublin than in Belfast.

Prime office space in Belfast is being rented at £9.50 sterling to £11 sterling per square foot compared with £17 to £18 in Dublin.

The variation is even greater in two landmark developments in both cities. Offices in the Laganside development in Belfast where there are no tax incentives rent at £9.50 to £10 per square foot, while space in the IFSC in Dublin makes £26 to £28, largely because the licensed traders pay a corporation tax of only 10 perk cent and no rates for 10 years.

The Custom House Docks scheme has been funded almost entirely by private investors, whereas Laganside received major up-front investment from the British government.

The vacancy rate for offices in Belfast generally stands at 10 per cent, compared with 4 per cent in Dublin.

The office stock in Belfast is considerably smaller at 5.7 million square feet as against 14.5 million square feet in Dublin.

Since 1989, the Northern Ireland property market fared better than any other part of the UK. Last year's returns are not yet available but the annualised total return in the North between 1990 and 1995 was 13.4 percent.

In Dublin, all property returns in 1996 reached 18.9 per cent, while the annualised figure over the past 10 years works out at 12.3 per cent.

Prime office yields in Dublin stand at 6.25 per cent, compared with 8.75 per cent in Belfast. The Dublin retail market is showing yields of 5 per cent, 1 per cent below those in Belfast. In the industrial sector, Dublin yields are again lower at 8.25 per cent, compared with 9.5 per cent in the North.

Larry Brennan of HOK said that while retail warehousing would continue to grow rapidly in Northern Ireland - 600,000 square feet are planned for the next three years - the development of similar facilities in the Republic would take longer because of the absence of a clear pole icy by the planners and a shortage of sites near major shopping centres.

Zone A retail rents in Dublin have now surpassed Belfast at £190 per square foot, compared with £180 in the North.

Mr Brennan said tight planning laws were restricting the development of new centres in Belfast. There was only one new scheme, Forestside, under construction in the city.

Dublin was experiencing a major boom with 835,000 square feet of retail space completed in 1996 and a further 1.2 million square feet planned by the year 2000.

Paul McNeive said there was clearly an opportunity in the North for high-bay warehousing and business space. Almost one million square feet of these units have been built in Dublin over the past five years. In the North, there were only three high-bay warehousing buildings.

He believed there were also opportunities to develop large distribution centres to service customers on both sides of the Border.

The two agencies said the recommended buys in the Dublin market lay in the industrial sector, office business parks and retail warehousing. In Belfast, the obvious area was shops and retail warehousing but offices were also likely to show a rapid increase in rents.