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Pubs make way for apartments
Kieran Flynn



BEHIND a wooden hoarding on the Finglas Road last week, JCBs were being used to shift a high mound of rubble. The dusty chunks of concrete and wedges of plasterwork were all that remained of the Royal Oak pub, for decades a landmark licensed premises on the north side of Dublin city. A planning notice nailed to the hoarding explains the purpose behind the pub's destruction: 86 apartments in three blocks are to be erected on the site.

The demolition of the Royal Oak represents the latest example of a growing phenomenon . . . the sale of licensed premises for alternative use. New statistics reveal that almost a quarter of the pubs sold in Dublin in 2006 are being redeveloped into high rise apartment blocks. Filling stations are increasingly seen as possessing redevelopment potential. Figures just released by the Irish Petroleum Industry Association (IPIA) indicate a marked drop in the number of petrol retail outlets in the country, down 50% in 10 years.

According to Morrissey Auctioneers, 34 pubs have changed hands in Dublin in the first 10 months of the year. Of those, seven were sold for alternative use. Headline deals include the sale of the Dollymount Inn for over 15m, the Greyhound Inn for 11m and the Royal Oak for 6.5m.

Morrissey's on Friday closed the book on tender offers for the Addison Lodge in Glasnevin, another landmark licensed premises earmarked for alternative use and likely to achieve in excess of the 11m guide price. "We had 78 enquiries about the sale, " says Tony Morrissey.

With development sites in short supply builders increasingly see pubs as attractive propositions. Well located urban premises often have sizeable landbanks and are zoned to offer maximum redevelopment potential. "Prices paid for pubs that end up as residential developments are often 40 to 50% more than what they're worth as a going concern."

The alternative use phenomenon is causing a dramatic decrease in the number of service stations and motorists could soon face having to drive out of their way for petrol, industry sources claim. In 1995 there were 2,457 petrol stations in the Republic. By the end of 2005 that figure had dropped to 1,227.

Hamilton Osborne King (HOK) sold 10 filling stations during 2006 including a site on the Merrion Road for 16m and a site on the Stillorgan Road for 12m.

"And every last one of them went for alternative use, " says Mark Reynolds, HOK's director of development land. "In each instance the value of the asset way outstripped the value of the business."

He says the value is calculated taking into account the service station's location and the number of residential units likely to be given the go-ahead by the planning authority.

"There's so little urban land available, developers are prepared to pay over the odds, " says Marie Hunt, head of research with CB Richard Ellis. "With new residential guidelines allowing higher density due to come into effect next year land values look set to increase even further."

MARKET WATCH

Top investment deals 2006 Pavilions Shopping Centre Size: Site area 24 acres Yield: n/a Sold: 575m Purchaser: Developer AIB Bank Centre Size: 325,00 sq ft.

Yield: 3.26% (on the investment portion) Sold: 377m Purchaser: Institution/developer.

Bank of Ireland Sale & Leaseback Portfolio Yield: Average 3.25% Sold: In excess of 237.5m Purchaser: Private individuals, institutional funds and private syndicator investors.

Newbridge Shopping Centre Size: 350,000 sq ft of retail space.

Yield: 4.5% (on the retail units) Sold: 220m Purchaser: Investment fund Bank of Ireland HQ Baggot Street Size: 220,592 sq ft Yield: 2.8% (low initial yield re"ects the development potential of the site) Sold: 212m Purchaser: Developer/investment fund

RETAIL STRONG demand for space and significant activity in the investment sector marked the year in the retail property market.

International retailers have competed aggressively while among the home players Dunnes Stores has maintained a high profile.

Developer Joe O'Reilly, who already has a stake in the Dundrum shopping centre acquired the Pavilions centre in Swords for a sum believed to be in the region of 575 million.

The deal of the year on the occupier side was Debenhams' acquisition of the nine Roches Stores branches. And the headline story in a quiet year on the shopping centre front was opening amid much fanfare of the Whitewater centre in Newbridge County Kildare.

"There has been a lot of demand from Irish and international retailers for prime shopping space with a number of retailers chasing the same units, " points out Cormac Kennedy of agents C B Richard Ellis's retail department.

"Many centres are trying to make themselves different, such as Dundrum and Beacon Court, by bringing in new names. It's true that many names are similar across some centres, the reality is that this is what the customer wants."

One of the more significant news stories was the granting of planning permission by Fingal County Council for a new IKEA store at Ballymun.

Planning has also been granted for a 60,000sq m extension to the Square shopping centre in Tallaght.

Zone A rents on Grafton Street are in the 10,000 per square metre range, roughly 2,500 above Zone A rents on Henry Street.

However Arnott's ambitious plans for the north city centre area are expected to boost the location's retail profile significantly.

"I think the most important thing to note about the market in 2006 is that there is still pent up demand for prime retail space all over the country, " says Cormac Kennedy.

"International retailers see Ireland as a great location for expansion and many are keen to get more representation over here."

INDUSTRIAL THE industrial property market enjoyed a record year with land values up by 30% at the end of 2006.

There was more modest growth of approximately 10% for building values whilst rental values remained stable during the year.

"Demand is continuing to outstrip supply in prime locations close to the airport along the M1/N2 corridors and in southwest Dublin along the N7 and N81 corridors within close proximity to the M50, " says Garrett McClean of estate agents C B Richard Ellis.

"This strong demand has resulted in increased land values for prime serviced land within close proximity to the M50, particularly in southwest Dublin, northeast Dublin, and in north Wicklow along the north eastern N11, " he adds.

The total take-up of industrial accommodation in the greater Dublin area in 2006 is expected to be approximately 200,000sq m, bringing the vacancy rate down to 11%. Of the take-up in 2006, over 70% took place in northwest and southwest Dublin.

"An interesting statistic on the vacancy levels is that half of the vacant space is considered obsolete by today's standards or is located on IDA estates where users are restricted to manufacturing companies or companies involved in internationally traded services, " says Gavin Butler, of Hamilton Osborne King.

In south county Dublin, the phenomenon of industrial buildings and sites being redeveloped for higher value uses including residential and offices continued in 2006. This has fuelled demand for industrial land and buildings in north Wicklow where values for small industrial units are on a par or higher than anywhere else in the greater Dublin area.

"The opening of the Port Tunnel before Christmas will create a frenzy amongst occupiers as they battle it out for land and buildings which will give them access to the country's most important infrastructural project and thus a competitive edge over their rivals, " Butler says.

OFFICE UNSPECTACULARmay be the appropriate adjective to describe activity in the office market during the year. However, economic indicators are good, experts say, and rents could increase significantly during the next 12 months.

Take-up of over 60,000sq m in the third quarter of the year alone is evidence of an exceptional level of activity in the Dublin office market since the summer period and suggests that over 185,000sq m of office accommodation will be let in the capital this year . . . the highest level of letting activity since 1998.

The majority of this activity is focused on the city centre market, where the vacancy rate has now declined to 5%.

Prime rents in the core city-centre market have risen over the course of 2006, reaching a new record level of 645 per sq m in recent weeks.

Activity in the suburbs remains steady with continuing demand from owner-occupiers for owndoor office units ranging between 150 and 500sq m.

Tenant incentive levels including rent-free periods and capital contributions have reduced significantly during the year and look set to reduce further. "What this signifies, in real terms, is that the market has moved back in favour of the landlord again, particularly for prime buildings in Dublin 2 and 4, " says James Mulhall of CB Richard Ellis.

Activity in the south suburbs continues to dominate. In Sandyford, the Luas line has invigorated the market with rent rates of up to 269 per sq m being achieved.

The most significant letting in the expanding docklands region was at Sir John Rogerson's Quay where law firm Matheson Ormsby Prentice opted for a 25-year lease on Sean Dunne's Riverside IV scheme.

Perhaps the boldest move of the year was the decision by Anglo Irish Bank to relocate to new offices planned by developer Liam Carroll at the Brooks Thomas timber yard site on Mayor Street, close to The Point.




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