Thursday 22 March 2018

Can warehouses fix housing?

The Luas Red Line serves the Naas Road.
The Luas Red Line serves the Naas Road.

The industrial property market is often referred to as "the barometer of the economy" and increasing rents and prices in the sector mirror our economic growth. Demand and values have recovered to the stage where speculative new building is viable again in some locations.

But before we embark on another wave of patchy industrial development, isn't it time that we reassess the strategy behind our industrial zonings and particularly how industrial sites can be part of the solution to our housing crisis?

The first development of "modern" industrial property was in Dublin city centre from the 1960's, which made sense, given the access to the port, to the city centre for distribution and to the labour supply.

From the late 1960's, Dublin followed an international trend of moving industry and housing out of the city, to the suburbs. At the time, this too was logical; there was more space available to build modern buildings, the labour supply was moving out to better quality housing and taking trucks out of the city centre was desirable too.

Thus the late 1960s and 1970s saw a huge wave of development of factories and warehouses on what was then the edge of the city.

The Naas Road, as the main artery, was the centre of this and hundreds of acres of industrial estates like John F Kennedy, Bluebell, Goldenbridge, Kylemore and Killeen were built. On the northside, schemes like Dublin Industrial Estate, Ballyboggan, Broombridge and Tolka Valley tapped into the labour pool centred around Finglas.

However the main reason why industrial property investments have the highest yields is because of the buildings susceptibility to obsolescence. Manufacturing processes see buildings deteriorate quickly and become redundant as methods change. For warehousing, changes in loading and racking systems, forklifts, truck design and technology, see buildings become inefficient, less attractive and less valuable.

Eaves heights in particular have soared over 10m for modern logistics buildings, where robots and computerised machines stack and pick orders, whereas most of the original estates have eaves heights of just four to six metres.

Most old buildings have asbestos roofs and very poor energy efficiency. Consequently, many of those buildings have gone into a downward spiral of uses and value as occupiers prefer modern buildings around the route of the M50.

But as the city continues to spread outwards, these older industrial estates have become the "inner suburbs." Their location is now far more convenient to the city centre than the modern "business parks" which now stretch well outside the M50 corridor.

Most importantly, many of these locations have very good public transport, for example, the Luas runs down the Naas Road. These sites values are reducing for industrial use and increasing for residential use.

But how can the state take advantage of this dynamic? Because of the large size of these estates, "big picture" planning and action is required and co-operation between the local authorities. Interestingly, the Dublin City, the South City and the Fingal development plans are all currently being reviewed.

My suggestion is that Dublin City Council rezone a swathe of older industrial estates for relatively dense apartment development. This increases those sites values and makes it more viable for companies to relocate. Simultaneously, the other councils should zone hundreds of acres outside the M50 for industrial development, thus making new locations available and suppressing site prices.

The local authorities should work with occupiers to assist them relocate and where necessary should use their compulsory purchase powers to bring vacated inner suburban sites to the market within four years. The result would be a huge boost in the supply of apartments in good locations and a reduction in commuting times. There will be far less traffic on the M50, and inside it, as industry moves to better buildings on good motorways, further out.

In the north city, the proposed junction on the M50 at Cappagh Road, Finglas, which was latterly omitted from the motorway for cost reasons, should be built as a priority.

This would open up proper access to many hundreds of acres of land ideally suited for relocating industry, with great access to the motorway, the port tunnel and the airport.

The population, and employment, increased steadily in Dublin throughout the recession. Most of those jobs are located in suburban office buildings, the factories of today.

Markets change, and much of our industrial stock is too old and in the wrong locations. It's time for radical rezoning.

Indo Business

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