Seanad debates

Wednesday, 6 March 2024

Nithe i dtosach suíonna - Commencement Matters

Vacant Properties

10:30 am

Photo of Lisa ChambersLisa Chambers (Fianna Fail)
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According to a new report from GeoDirectory and EY Economic Advisory Services, one in five commercial premises in Galway city is lying empty. The report was published yesterday and reported by Enda Cunningham, the editor of The Connacht Tribune. The report detailed vacancy rates across the country with some very stark percentages, particularly for the west of Ireland.

Nationally, the average vacancy rate is standing at 14.3%. This is the highest it has been since GeoDirectory began its services in 2013. At the beginning of 2013, the vacancy rate for County Galway was 12.8%. Commercial vacancy is on the rise nationally and is worrying but the numbers in the west of Ireland are even more concerning. Galway now has the second highest number of empty premises in the country behind Sligo and the commercial vacancy rate in Sligo stands at 20.5%. In Galway, it is 18.5%; in Donegal, it is 18.2%; and in Mayo and Roscommon, it is 17.4%. They comprise the top five counties, all of which are in the west of Ireland and far above the national average of 14.3%.

By comparison, the lowest rates in the country were in Meath at 10%, in Wexford at 10.5% and in Cork at 12.2% so this paints a very clear picture of an economic imbalance between the west of Ireland and the rest of the country. I believe the Department of Enterprise, Trade and Employment should urgently review this report and the data contained in it and come up with a properly resourced plan to address commercial vacancy in the west of Ireland.

A breakdown of the figures at the end of 2023 shows that for Galway city, the rate was higher than the rate in County Galway at 20.1%. Tuam recorded the largest vacancy rate in County Galway at 26.1%. That was the sixth highest placed town in the country. It comes in behind Longford at 30.2%, Shannon, County Clare, at 29.8%, Ballybofey, County Donegal, at 29.4%, Boyle, County Roscommon at 27.6% and Sligo town at 26.2%. Not one of those towns is in the east of the country. Apart from Longford, they are all in the west of Ireland. Something must be done about this because they are all west of the Shannon. Why is that?

Dara Keogh, the chief executive of GeoDirectory, has said the rate of commercial vacancies in Ireland has hit a new high of 14.3%. This trend can be attributed to a number of factors such as the rising cost of doing business, changing consumer habits and hybrid working. She says that consideration must now be given to how some of these vacant properties can be repurposed and reused to avoid long-term vacancy and potential dereliction. This must really stand as a stark warning because dereliction is already a problem in the west of Ireland so we do not want to add to it. Annette Hughes, the director of EY Economic Advisory Services, said that businesses have been affected by a series of factors in recent years that have led to challenging trading conditions for many so this increase is not unexpected.

Nothing every stands still, hybrid working has been fantastic for workers and changing consumer habits are part of life so there is little a Government can do about these issues. Moreover, businesses will respond to those consumer changes. However, we can address the rising cost of doing business and this has been highlighted by every business representative organisation, particularly in the past couple of years. A lot has been asked of business this year. We have had auto-enrolment, an increase in the minimum wage, the introduction of statutory sick leave and the VAT rate went back up to 13%. Apart from the increase in the VAT rate, these are all changes that are supported by businesses but they are having an impact on costs.

The elephant in the room is commercial rates. It is simply too expensive to set up a physical business with a shopfront as overheads are so high and businesses are competing with very sophisticated online retailers that do not have the same overheads. We need to think outside the box and evaluate the position of physical shopfronts. We have to encourage businesses to rent premises and to make it affordable for them to do so as otherwise, our city and town centres will be hollowed out and we will have long-term vacancy and dereliction. There is therefore a public interest argument for really addressing the cost of physical businesses on the ground. If we want people to set up businesses, we have to make it affordable. At the end of the day, businesses have to make a profit.

Photo of Pippa HackettPippa Hackett (Green Party)
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I sincerely thank Senator Chambers for raising this really important issue and allowing me the opportunity to provide an update on this matter on behalf of the Minister, Deputy Coveney.

It is important to first acknowledge a high level of vacancy does not represent a productive use of commercial infrastructure. However, it should also be noted that vacancy levels can rise and fall depending on economic activity as well as in response to broader economic trends. For example, the shift in work patterns initially precipitated by the onset of the Covid-19 pandemic has contributed to the current context in which a significant portion of commercial property in many of our towns and cities is currently vacant. With that said, I am conscious of the need to ensure the existing commercial space across the country is put to the best use possible. Certainly, Senator Chambers has highlighted some very stark figures.

Tackling vacancy is a key priority for this Government. The programme for Government commits to examining ways to ensure unused and underused building stock in urban centres can be made available for much-needed housing. The Department of Housing, Local Government and Heritage has also convened a working group on the redevelopment of vacant commercial properties, which the Minister, Deputy Coveney's Department participates in. The objective of the group is to assess and make recommendations about the potential for the development of vacant commercial properties for housing. It is anticipated the working group will submit recommendations to the Minister for housing in quarter 2 of this year. Increasing housing supply is also of paramount importance in ensuring that Ireland remains a competitive location for FDI. Given the current volume of vacant commercial property, I understand commercial-to-residential conversions could represent a significant opportunity, especially in urban locations.

The city of Galway is a crucial part of the west’s attractiveness to FDI. There are 128 IDA-supported companies in the west region, with 103 in Galway city and county. These employ 24,080 people, notwithstanding that employment in the west region dipped slightly in 2023, including in Galway. The availability of property and infrastructure solutions that meet the needs of MNCs and indigenous clients remain essential to winning investments and the IDA currently has a second building under construction in Galway as well as a building in Oranmore at site selection stage.

Regarding specific interventions, the Department of Housing, Local Government and Heritage launched the vacant property refurbishment grant in July 2022. The grant provides support of up to €50,000 for the refurbishment of vacant properties, including over the shop residential units, with a further €20,000 available where a property is derelict. More recently, the town centre first policy was launched by the Department of Housing, Local Government and Heritage and the Department of Rural and Community Development in February 2022 to tackle vacancy and dereliction and breathe new life into our towns. The Minister, Deputy Coveney's Department is also leading on the increased cost of business grant announced as part of budget 2024, which will target SMEs operating from a rateable premises. The grant is intended to aid firms most affected by increases in business costs, but is not intended to compensate for all increases in wages, or other costs, for every business.

Photo of Lisa ChambersLisa Chambers (Fianna Fail)
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I thank the Minister of State. It is interesting there are probably more mentions of the Department of housing in the reply than the Department of enterprise, which was responding today. In any event, why should we be concerned about commercial vacancy? I refer to our national development plan and Project Ireland 2040. The plan runs from 2021 to 2030. Contained in this plan is a commitment that Galway, as our city in the western region and our regional economic driver, would grow at twice the pace of Dublin through sustained investment. It also outlines an ambition for Galway to significantly grow its population and jobs by 50% to 60% and become a city of greater scale. With the commercial vacancy rates we are seeing I question our ability to achieve these worthy and ambitious targets. This planned growth is vital to the economic growth of our western region. I ask again that the Department of enterprise urgently review the report I have mentioned and prepare a plan to address commercial vacancy in Galway city and in the west.

I will deal with some of the points the Minister of State raised in the reply she delivered on behalf of the Minister, Deputy Coveney. While I accept vacancy does not represent a productive use of commercial infrastructure, we must acknowledge that if we walk down, say, Shop Street in Galway and there are buildings empty it is not a good look for our city and is bad for other businesses around there that are trying to survive. We need to increase footfall. According to the Minster, Deputy Coveney, vacancy levels can rise and fall. However, figures will show they are only rising. If we look at the programme for Government, we are committed to examining ways to ensure unused buildings come back into circulation. We are four years in now and we are still waiting on a plan to be published on that. I ask again a sense of urgency be applied to this. While I appreciate there have been Government initiatives like the vacant property refurbishment grant and the town centre first policy, these initiatives are from the Department of housing rather than the Department of enterprise. The increased cost of business grant has been welcomed, but the €250-odd million put into that grant is looking like about €5,000 per business. It is not going to be enough to offset the increased costs to business. I urge the Minister, Deputy Coveney, to really take a look at the commercial rates situation. We need to make it affordable and viable for businesses to rent physical premises, especially with the increased use of online shopping. We have to think outside the box for Galway and the entire western region.

Photo of Pippa HackettPippa Hackett (Green Party)
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I thank the Senator. I am sure the Department will examine the report in full. As she highlighted, the figures are stark. Just to reiterate, the Government is committed to addressing vacancy and maximising the use of existing building stock. It is essential we consider the best means by which to ensure vacant properties are brought back into effective use. Beyond ensuring the most efficient use of our existing buildings I am also aware that from a climate and sustainability perspective there is a strong incentive to retain, repurpose and, where necessary, redevelop our vacant structures as they may represent a significant volume of embodied carbon. Thus, it is in our best interest to fully explore the options available to us for repurposing these structures. I again thank the Senator for raising this. It is an important issue.