Business Irish

Monday 24 June 2019

€118m bill for renting from rich

State fails to negotiate lower rates for 'empty' office space despite collapse in property prices

Vincent Ryan

THE Government is spending €118m a year renting office space in Dublin from some of Ireland's richest people, and has so far failed to negotiate discounts despite the collapse in property prices.

Included in this figure is €1.127m spent renting empty office space, the Sunday Independent has learned.

Beef baron Larry Goodman, the Dunne retail family and property developers Liam Carroll, John Dwyer and Anglo-Irish Bank, are among a list of big names all making large sums annually from renting office space and other buildings to central government and other public service bodies, according to figures obtained by the Sunday Independent.

The biggest earner from rent is Insurance company Irish Life Assurance who made €10m from renting 17 properties to the State for use by government departments and state agencies as offices.

The biggest single beneficiary is John Dwyer who earns €6m a year from his three companies, Alstead Securities, Carlisle Trust and Dublin City Estates.

Companies controlled by the Dunne family made €1.8m while other names included. Larry Goodman's company Reverie Ltd which made €63,000 a week from renting buildings in the Setanta centre to the Revenue Commissioner, the Oireachtas, and the Registry of Deeds.

Liam and Roisin Carroll made €2.35m renting Chapter House and 53-56 Great Strand Street to the Civil Service Commission and the Ombudsman for Children.

Michael O'Leary's Ryanair is also making €330,000 a year renting Phoenix House on Conyngham road to the Special Residential Services Board and the Health Service Partnership.

Anglo-Irish Bank are amongst the share holders in Gertonabbey Limited which makes €2.524m renting 29-31 Adelaide Road to the Department of Communications

The Office of Public Works says it rents office space as needed on behalf of government and other public service bodies. However many of the rent contracts have upward only conditions attached, meaning the rents cannot be reduced.

A spokesman for the OPW said they were reviewing the amounts they pay in renting public buildings in light of the decline in the market.

"It has been standard practice that rent reviews were normally upward, but since the beginning of 2009 OPW has insisted on adhering to market trends and values, which means for us a rent can be reviewed up or down," the spokesman said.

However the spokesman admitted that this can only be applied to new contracts and that most of the existing contracts could only be maintained at their current levels.

The spokesman also defended the amount spent renting empty office space. He said that the OPW keeps one per cent of its property portfolio vacant so as to maintain a degree of flexibility in case a new tribunal or agency is formed.

The norm in private industry is to maintain seven to eight per cent of property vacant but the OPW is trying to keep it down to the bare minimum, he added.

However leading estate agents in Dublin have confirmed that, based on current rents in the capital for commercial office space, the State could get 35,000sq ft of space in city centre, equivalent to half a soccer pitch, and four times that much in commercial and retail parks in the suburbs, for this amount.

Sherry Fitzgerald Communications Director, Jill O'Neill, confirmed that commercial rents in Dublin have fallen by as much as 13 per cent since the property bubble burst in the last 18 months.

At a conservative estimate that means the State could have saved about €15m if it had sought to renegotiate the terms of leases on buildings it is renting across the capital in the last year alone.

Dublin City Chamber of Commerce called for the scrapping of upward-only rent review clauses in commercial contracts in a pre-Budget submission last month.

"Ireland is amongst a small minority of countries that allow upward only rent review clauses in commercial rent agreements, which is making it impossible for some companies to keep rental costs in line with their other costs," it said.

Economist Eddie Hobbs described the situation as a farce. "It's beyond outrageous that this is continuing to happen at a time when money is absolutely scarce, and the public sector is still behaving as if there isn't a problem. It's not just with pay and pensions and public sector union chiefs, we can now see that it's in the spending as well," he said.

Fine Gael TD Joe McHugh called on the Government to review the massive amounts spent on rent.

"The State is spending far too much public money on rent every year,'' he said.

"Obviously the State needs to facilitate the civil service and the work of state agencies. But we are paying way over the odds for these properties."

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