Neil McDonnell: No going back to pre-covid levels of commercial property
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The election rallying cry for the Democratic Party nominee Kamala Harris in this year’s presidential election is “we’re not going back!” The Department of Housing, Planning and Local Government should consider pilfering the slogan in November. The sad fact, as far as town centre commercial property is concerned, is that we are never going back to pre-covid-19 patterns of commercial property occupation.
The national commercial building vacancy rate rose to 14.4% in the second quarter, according to GeoDirectory, the highest rate it has ever recorded.
This represents 30,246 commercial units recorded as vacant by GeoDirectory in June 2024; a large estate of vacant property that could be put to better use.
The Department of Housing is currently holding a consultation on introducing “meanwhile use” legislation with the intention of bringing empty buildings and shopfronts on main streets back into compatible use on a short-term, temporary basis as pop up shops, street markets, exhibition spaces and other purposes in accordance with Town Centre First policies.
This is a worthy initiative, but many of these vacant properties will never return to commercial use. The facts on the ground have changed.
Firstly, working from home is now an established phenomenon. Yes, some large businesses are asking staff to return to the office, but thousands of employment contracts out there in permanent employments give people the right to work from home or work hybrid. A flexible working from home contract may also be the only way for many SMEs to attract talent. This is great for employees, but it has gutted footfall in our towns and villages on Mondays and Fridays.
Secondly, online shopping was another pandemic phenomenon that took off and will not revert to pre-2020 levels. Cost, convenience, and almost perpetual availability of online stock means that brick-and-mortar retail has a behemoth of a competitor it cannot shake.
Thirdly, small brick-and-mortar shops are also affected by “destination shopping,” which sees people willing to travel long distances in Ireland to go to Dundrum, Liffey Valley or Kildare Village shopping centres. This is now an established pastime.
Finally, commercial rates remain high for the footfall and turnover main street businesses enjoy. Rates need to be rethought and reengineered. Isme has for years called for commercial rates to be calculated on a site value rather than open market basis, since the latter penalises town-centre property and encourages donut development.
Isme believes that commercial properties that cannot be quickly returned to commercial use should be converted to housing. And in the case of units successfully returned to commercial use, we want to see people “living over the shop.” This will take money and imagination.
The Government’s Croí Cónaithe Towns Fund is an excellent initiative, providing grants of up to €50,000 (with a potential €20,000 top-up) available to restore a derelict site to residential use. But it can only be applied for by persons who will use the property as their principal and private residence. Builders and developers cannot apply. This makes no sense.
Many shop buildings are owned by a company rather than an individual, and they are ineligible. For those who are eligible, they can apply to live in one unit and fix one more. There is no good reason this scheme should be so restrictive.
The Repair and Leasing Scheme is designed to bring vacant properties in need of repair back into use for social housing. It is open to contractors but on highly restrictive terms.
Ireland has a critically serious issue with the availability and cost of housing for citizens. Prior to the financial crash, tax incentives ensured a plentiful supply of housing and apartments at affordable rents. These tax incentives were not the cause of the crash — irresponsible lending was.
Roll forward a decade and a half and we have tight regulation in place, but also the highest rent and house prices we have ever seen.
The state cannot solve the accommodation crisis on its own. The private sector can and will come to the party, quickly, if it is incentivised to do so. Finance Minister Jack Chambers can start the ball rolling on budget day with an incentives package that will cost the state very little but could return 30,000 vacant commercial properties to the housing market in double-quick time.
- Neil McDonnell is chief executive of Isme