Magazine article Real Estate Issues

Commercial Real Estate in Dublin 2003-After the Boom

Magazine article Real Estate Issues

Commercial Real Estate in Dublin 2003-After the Boom

Article excerpt

SECTION 1

INTRODUCTION AND MARKET CONTEXT

The demand for commercial real estate in the Dublin market in recent years has been driven by several main factors-continued strong growth in the general economy, high levels of inward investment particularly in the IT sector, expansion of the financial services sector and growth in urban tourism. The dominant role of Dublin and its surrounding Greater Dublin Area (GDA) can be illustrated by a comparison of the GDA to the rest of Ireland. The GDA, incorporating Dublin and surrounding counties of Kildare, Meath and Wicklow contains 1.53 million inhabitants, representing almost 40% of national population (CSO, 2002). Approximately 47.5% of all immigrants into Ireland come to this region and 49% of all employment growth in Ireland is located there (Williams and Shiels, 2002). This growing dominance of the Greater Dublin Area and Dublin city in particular places particular pressures on urban land markets and is clearly evidenced in emerging constraints in the GDA including problems of accessibility and congestion, infrastructure constraints and affordable housing difficulties.

A critical appraisal of the Dublin urban land development pattern indicates a major surge in outward infrastructure led development with a notable absence of inter-suburban transport links and essential services infrastructure. In summary, the Dublin urban land market is a clear example of the difficulties involved in managing rapid economic growth in an urban area in a sustainable manner. The analysis, which follows, includes research conducted under the European Union Group for European Metropolitan Areas Comparative Analysis, Second Project (EU GEMACA II, 2001) and the Quarterly Reports on Property Investment undertaken by the Dublin Institute of Technology (DIT) and Lambert Smith Hampton (LSH) during 2001 and 2002.

The structure of this article comprises of an introduction and analysis of the Dublin market context in Section 1, an examination of the changing economic driving forces for real estate demand in Section 2 and an overview of current sectoral investment patterns in Section 3, followed by conclusions.

DEMAND FOR REAL ESTATE

There is clearly a strong correlation between economic growth, employment trends and demand for real estate. Over the period 1990 to 2002 the economic profile of Dublin has changed from one of the weaker urban economies of Northwest Europe to one of the strongest. Growth in Dublin currently accounts for over 38% of Irish GNP, which has been increasing by approximately 8% per annum in the years to 2001. This compares with the stagnant economy of the middle to late 1980s and an emergence from recession in the early 1990s. Employment trends show that employment growth of 34% or 127,000 new jobs was evidenced over the period 1995 to 2000 (Dublin Chamber Of Commerce, 2000). Unemployment has reduced from 12% in 1996 to 4% in 2000. Financial services, the IT industry, construction and general business services have shown the strongest growth over the period. The weakening international and local economy is reflected in the more modest growth rate of 3% expected in 2002.

RESULTING COMMERCIAL DEMAND

As a result of the region's economic activity there are over 40,000 businesses in the city, 37,000 of which are service companies, and 1,300 manufacturing companies along with the state and semistate sector (GEMACA II, 2001). Commercial activities in the city are centered on the old commercial business district, the new urban renewal areas adjacent to the commercial core and the new peripheral areas particularly to the west of the city. Examples of traditional industry in Dublin included the Food and Drinks Sector such as Guinness, Irish Distillers and Cadbury while a dominant force in new demand has been inward investment in the Electronics/Computer Software Sector whose significance to the region is illustrated by their employment levels (e. …

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