Wednesday, 17 December 2014
Ceisteanna - Questions - Priority Questions
Property Market Issues
2. To ask the Minister for Jobs, Enterprise and Innovation in view of the growing difficulties within the commercial property sector, the steps he is taking to ease cost competitive disadvantages and create jobs in construction industry. [48458/14]
A crisis is developing in the property sector. House prices are rising in the Dublin area at a faster rate than during the craziest days of the Celtic tiger. This has the effect of denying many people homes, increasing pressure on wages and making the city of Dublin and surrounding areas very uncompetitive.
Since the crash, access to commercial property is drying up within the State for some of the same reasons as residential property. There are difficulties with regard to the cost of development and access to finance for organisations. That is creating strain within the FDI sector and within the indigenous enterprise sector, as they search for space.
The house price issue will have to be directed to another Minister, but I can deal with the issue the Deputy inquired about on the commercial property sector. The Central Bank noted that 2013 saw the largest investment in commercial property since 2007, at €1.8 billion, with 60% in the office market, and that investment activity has remained strong into 2014. The growth in demand for office accommodation in particular is due in part to our continued success in attracting new foreign direct investment and the recovery in the economy more generally.
The availability of cost-effective and flexible property solutions continues to play a key role in supporting the delivery of FDI into Ireland. Many recent investments won, including West Pharma in Waterford, LinkedIn and Novartis in Dublin, Apple in Cork, Regeneron in Limerick, Jazz and Alexion Pharmaceuticals in Athlone and eBay and Paypal in Dundalk, among others, had significant property and infrastructural requirements that were a key component of their business case and rationale for investing in Ireland.
In the larger urban centres, the availability and supply of grade A office accommodation is a challenge in an environment of ongoing demand, particularly from FDI, diminishing availability and a lack of substantial speculative development. These issues have led to rental inflation in Dublin, Galway and Limerick during 2014, with prime rents relatively stable in the Cork market.
The autumn review of the Irish office market by DTZ Sherry Fitzgerald estimates that the current office vacancy rates range from 11.8% in Galway, 14% in Dublin and 18% in Cork to 20.5% in Limerick. In terms of new construction of office accommodation, DTZ estimates that 8,500 sq. m of office space is under construction in Galway and 16,000 sq. m in Cork, while in Limerick, 13,300 sq. m is under construction, and in Dublin an estimated 22,500 sq. m is under construction. The agencies of my Department, particularly IDA Ireland, are in continuous dialogue with key stakeholders in the property market to ensure the required competitive property solutions are available in the short and medium term.
While the office market nationally is leading the way in terms of recovery, with overseas investors such as Kennedy Wilson and Blackstone and the likes of NAMA investing in substantial commercial developments across the country - for example, the Dublin strategic development zone, Bolands Mills, and Albert Quay in Cork - there are also significant opportunities to refurbish older buildings nationally, which could increase the supply of commercial stock suitable for FDI and allow us to maintain competitiveness over time.
Additional information not given on the floor of the House
In May 2014, the Government published Construction 2020 – a Strategy for a Renewed Construction Sector, which contained a detailed programme of work, including 75 time-bound actions across a range of issues including housing, the planning process, availability of financing, monitoring and regulating the sector, and ensuring that we have a highly skilled workforce and opportunities for construction jobseekers. The latest data from the CSO shows a significant recovery in construction employment as the sector responds to an upturn in demand.
The housing market is a dysfunctional market currently. While it is not directly the responsibility of the Minister, thousands of jobs could potentially be created within the housing market if this dysfunction was resolved. I ask the Minister to focus on the area in the Action Plan for Jobs, which is meant to be a cross-departmental plan. Vacancy rates for commercial property are falling. We will have a problem if this country cannot continue to supply commercial property to indigenous and FDI companies. They will not necessarily relocate to another part of the State; they will relocate to another country. The IDA has sought to develop new advance factories in a number of different locations. However, 23 counties will not have such factories, which will be a challenge for them. In Meath, for example, we are told regularly that there is not enough space for large firms to move there. I am sure Louth has similar troubles.
I wish to refer to four issues briefly. Improved access to finance for developers locally is important to ensure they can build facilities to take the pressure off the Government. NAMA is not resolving its processes properly at the moment. The planning regime in the State is not suitable for current needs, nor is the supply chain within the construction industry suited to addressing the demand for commercial property.
I agree with the Deputy. That is the reason the Government published Construction 2020, which is the strategy for renewing the construction sector. It contains a detailed programme of work, including 75 time-bound actions across the issues the Deputy raised. They cover housing, the planning process, the availability of financing, monitoring and regulating the sector, and ensuring that we have a high skilled workforce and opportunities for jobseekers. This area is benefitting from a concerted approach. We are taking the same approach that we adopted in the Action Plan for Jobs, with time-bound actions that are regularly monitored. In terms of the impact, it is encouraging to see that the latest data from the CSO show a significant increase in the number of people at work in construction - well over 6,000 in the past 12 months. It is a sign that the construction sector is recovering. However, I recognise that there have been difficulties in the recovery, and the Government has sought to intervene to deal with some of the issues the Deputy has raised.
I am talking about workers in the construction industry. That side of the whole process is in chaos at the moment. As the Minister is aware, the instability arose from the Supreme Court decision in 2013 on registered employment agreements, REAs. Currently, there are widespread abuses within the construction industry in terms of the National Minimum Wage Act, relevant contracts tax, RCT, and pay and conditions, among other areas. That is creating enormous tensions for employers who are doing the right thing and therefore operating on an uneven playing field and workers who are trying to do the right thing. On the other side, one has unscrupulous employers and problems with RCT. The Government is failing to ensure compliance.
Contracts for public works contain measures relating to rates of pay and conditions of employment certificates. If compliance was sought and the certificates were properly regulated it would significantly resolve some of the disasters that are currently taking place. Men and women within the construction industry currently earn far less than the minimum wage. Those individuals are being supplanted every week in this country. One example I have brought to the attention of the Minister is that of the Kishoge community college site. If J.J. Rhatigan is involved in that type of practice at the Kishoge site, there is no doubt it must be happening in the large number of other sites on which he currently has building contracts from the Department of Education and Science.
If, as the Deputy says, there are cases in which the national minimum wage is not being paid, NERA will investigate. There are other cases that the Deputy has brought to my attention, which relate to the terms of employment. I understand the scope section of the Department of Social Protection is investigating them. The law in that regard is well established.
With regard to registered employment agreements, we are drafting legislation that will withstand constitutional challenge. The Minister of State, Deputy Nash, is working on that. We believe we are at a very advanced point in the development of the legislation, which we are treating as a high priority. Clearly, there are issues in this sector as it emerges from the crash that it has experienced, but the Government is taking concerted action as part of a solid programme to address all of the issues raised by Deputy Tóibín - the REAs, the planning system and access to finance.