Company closures as a result of the downturn in the high tech sector have had a domino effect on the industrial property market. The initial outlook for 2001 had been optimistic, but the year is ending on a low note with the vacancy rate shooting up to 11 per cent, the highest level recorded for some years and up 5 per cent on this time last year. Agents are re-marketing space that had been snapped up earlier this year, especially in the north-eastern area of Dublin.

The collapse of the high tech sector, with Gateway closing its premises and companies like Global Switch pulling out of a deal to take space in the IDA estate in Clonshaugh, north Co Dublin, sent a shudder through the market.

Vacancy rates, one of the key indicators of market performance, will continue to rise as companies defer expansion plans until the economy lifts according to Bill Tuite of Jones Lang LaSalle. "The volume of enquiries, both from Irish and international companies, is down considerably, and will probably remain so for the next six months. People are adopting a cautious outlook in this uncertain climate," he said. The downturn in the US economy means there is unlikely to be an influx of new multinationals to the Irish market at present.

However, the industrial market is not as overexposed as the office market and while prices are being readjusted downwards, oversupply is not a problem, Tuite maintains. Philip Lamass of DTZ Sherry FitzGerald agrees. "Some 300,000 sq ft has come back on the market in the Clonshaugh area due to the downturn in the high tech sector, but the market is holding steady in other areas of Dublin. Several deals have been put on hold, and businesses are opting to lease rather than purchase in this climate, despite the low interest rate environment," he said.

Office developments were seen to guarantee better returns than industrial, so there was a big rush on speculative office developments last year. Oversupply in this particular market is the result. What we are seeing, explains Tim Scannell of Lambert Smith Hampton, is buildings earmarked for office developments reverting back to the industrial market for short-term lets. "This is the case with at least half a dozen sites," he said.

This is the first quiet period the market has experienced in four years. Deals are taking longer to go through, which has resulted in prices falling as more and more land becomes available in certain regions according to Lamass. Speculative development is discouraged. However, the traditional indigenous manufacturing and warehouse industries are holding steady and there is still good demand for locations around the new road infrastructures, says Cathal Daughton of Lisney.

In general, capital values have stabilised. Well-located second-hand properties have remained strong but prices for new schemes are down about 5 per cent, according to Daughton. Purchase prices range from £90 to £110 (€114 -€139) per sq ft, while rents range from £7 to £9 (€8.88-11.40) per sq ft, according to Scannell. Increased competition between vendors and developers looking to attract potential occupiers is a key characteristic of the current market, according to Gavin Butler of Hamilton Osborne King.

Fewer units, he adds, are being sold or let prior to completion. Construction is slowing down as developers wait for the current supply to be signed before starting on new development. As a result of this, industrial development land in the Dublin area has sufferred a reduction in values, says Cathal Daughton of Lisney. "The main supply of industrial sites in the Dublin area is concentrated in the north and north-west of the city. Some sites can now be purchased for prices in the order of £925,000 (€1.174m) per hectare," he said. Prices for sites in the southwest areas still range from £1m to £1.75m (€1.27m-€2.22m) per hectare. Sites in Naas, Newbridge and Kildare can also offer good value.

Last year analysts considered the total stock of warehousing/ light industrial property as small in comparison to the European market. The stock of space currently amounts to over 32.5 million sq ft, a third of it constructed in the last five years. Demand for modern space along the traditional industrial corridor in the south west of Dublin is still strong. Over half the total space currently under construction in the Dublin region is in this south-west corridor; of this two million sq ft, 59 per cent is pre-sold while another 8 per cent is pre-let. Among the developments that expanded this year were Parkwest Business Park and Citywest Campus.

In stark contrast to Dublin, the industrial market in Cork has experienced a high level of development activity and the forecast for next year is not quite so gloomy.

The Cork area can still expect to see a number of construction starts and new development proposals. There have been a number of major schemes this year, including the Euro Business Park and the Waterfront Business Park, both of which are located on Little Island, on the east side of the city.

Lisney, agent for the Euro Business Park, achieved £450,000 (€571,382) per acre for the most recent development site sale and report a good level of interest for the remaining sites on the 20 hectare scheme which is already three-quarters reserved. Companies locating in the park include Jones Engineering Group, Ascon, National Car Test Centre, Sam Hire, Nippon Express and Heatmerchants. Turnkey buildings can also be provided for sale or lease at the park.

Sale prices in the region of £85 (€107) per sq ft and rent prices ranging from £6 to £8 (€7.61-€10.15) per sq ft are being achieved in many of the new developments around Cork including the Waterfront in Little Island and the new Kinsale Road Business Park.

Details of two key developments were launched recently: the 6.5 hectare Westpoint Business Campus in Ballincollig in the west of the city and Blarney Business Park to the north of the city.

Similarly, demand for space remains steady in the market in the North of Ireland with rent and capital values pushing upwards throughout the year. A recent sale in the Duncrue area was said to have achieved a record £505,000 sterling per acre freehold. Recent lettings range from £2.75 to £6 (€3.49-7.62) per sq ft.