May 2008 Volume 2: Number 3
SCS
REVIEW
Running on empty? Planning: Density is our destiny Banking: Crunching the numbers Economy: Where now for the economy?
Providing services to the commercial and residential sectors Pat McGovern & Associates, established in 1991, provides a wide range of building surveying services including structural surveys, schedules of dilapidations, land surveying, and architectural services. Our valued team, a number of which have been with the firm for many years, has been a key part of the practice’s success. Through their consistent fulfillment of our customer’s requirements, they have enabled the practice to become a leader in its field and provide its services throughout Ireland. As part of our desire to maintain our reputation for providing a high level of service, the firm is committed to working within the framework of a quality management system that meets and sustains the requirements of the international standard ISO 9001:2000.
A new look A new style A new approach
Services are provided to both the commercial and residential sectors as follows:
Influence the key influencers in commercial property by advertising in the SCS Review.
Contact: Think Media Professional Publishing Services The Malthouse, 537 NCR, Dublin 1. T: 01 856 1166 F: 01 856 1169 E: paul@thinkmedia.ie W: www.thinkmedia.ie
Contents
16 The Society of Chartered Surveyors, 5 Wilton Place, Dublin 2. Tel: Fax: Email: Web:
01-676 5500 01-676 1412 info@scs.ie www.scs.ie
EDITORIAL BOARD Chairman:
John Oliver Costello
Board:
Tom Cullen Ciara Murphy Paul O’Grady Gillian Reynolds Derry Scully
PUBLISHERS
SCS Review talks to new Director General Ciara Murphy.
04
18
Challenging times – an opportunity for growth within SCS
Wrong numbers
05
20
Working for your approval
Crunching the numbers
05
22
Divisional AGMs, COBRA and more
Where now for the economy?
12
24
A professional publication
Mapping the outlook for construction
13
26
Density is our destiny
Hang on a second – are you registered?
President’s news
Legislation
Published on behalf of SCS by Think Media Ltd Editorial:
Ann-Marie Hardiman Paul O’Grady Design: Tony Byrne Tom Cullen Ruth O’Sullivan Advertising: Paul O’Grady
www.scs.ie
Editorial
News
Chairman’s report Views expressed by contributors or correspondents are not necessarily those of the Society of Chartered Surveyors or the publisher and neither the Society of Chartered Surveyors nor the publisher accept any responsibility for them.
Planning
Banking
Economy
Building
And finally ...
SCSREVIEW 3
President’s news
Challenging times – an opportunity for growth within SCS Newly elected SCS President SEAN McCORMACK presents his first overview of current issues for members. It is a great honour for me to assume the role of President of the SCS. I would like to thank Felix McKenna for his commitment and attention to the office of President. I have enjoyed working alongside him and his predecessors during my time as an officer of the Society.
Challenges for the SCS Changing market conditions bring a new set of challenges for our members and a changing environment for Chartered Surveyors generally. We have all experienced unprecedented and sustained growth in recent years, which, in turn, has brought significant pressures of workload, with ever-increasing demands from clients in terms of reporting times combined with high expectation of quality. Now a new challenge presents itself in terms of a more difficult property market and construction sector. We now face the task of managing client expectations with well reasoned advice while also providing the vision to see beyond current market conditions and taking a wider view. All of this presents the Society with a difficult challenge, but also with an opportunity to support and lead our members by promoting the Chartered Surveyor brand as the definitive mark of quality, skill and professionalism in the property and construction industry. The Society has a role to play within our industry as a centre of excellence, promoting the highest professional standards and supporting our members in whatever way possible.
Education and CPD The role and importance of the Society and the key focus for the years ahead must concentrate resources in key areas such as profile, branding, education, continuing professional development, communication and regulation, and maintenance of standards. In education, the Society has made significant progress by investing efforts and resources into our relationships with the colleges, and right through the APC process, working with employers in both construction and property. There is, however, scope for us to make improvements in the delivery of continuing professional development for corporate members and to work towards a system that provides consistently high quality CPD that is relevant to members and assists them in their professional day-to-day activities. This is an ongoing project, where much has been achieved, but it will require continued attention and resources from the team in Wilton Place, supported by the officers and other members who give considerable time to this area.
evolution of existing media such as the SCS Review, which will now be published on a quarterly basis. Next year will also see the publication of a full colour annual report outlining the progress of the Society during 2008/09.
Working group on third party arbitrators and independent experts Other specific short-term initiatives that I will be involved in during my term of office include the establishment of a working party to review the appointment of third party arbitrators and independent experts. This review will include an assessment of the appointment process itself, and the maintenance and management of the panel of Chartered Surveyors. In this regard, there is scope for specific CPD and training to enable the panel to be as diverse as possible but yet maintain a high consistent standard of skill and expertise across our members.
Research opportunities There are also opportunities for us in the area of research, which, in my opinion, has been underutilised and could provide the Society with an opportunity for a profile around well-researched independent comment. Recent successful examples of projects have included the ‘SCS Housing Study 2007’, prepared by Dr Brendan Williams, Brian Hughes and Patrick Shiels, and also, indirectly, the ‘Twice the Size’ study, prepared by The Futures Academy of DIT commissioned by the Urban Forum, of which the Society is part. Notwithstanding these, there is further scope to develop this area. I look forward to building on the great work carried out by my predecessors in the past. I look forward to meeting as many of you as possible throughout my term and will welcome all comments and contributions from the membership so that together we can help the Society grow from strength to strength.
Improving communication with members In recent years, much has been done to improve communications with members and this will be further developed in the short term. In this regard, our new Director General, Ciara Murphy, has initiated some new forms of communication, including a new SCS Bulletin and divisional e-zines, with the
4 SCSREVIEW
Sean McCormack ASCS, MRICS, ACI, Arb. President, Society of Chartered Surveyors
News
Fall in tender prices confirmed
Editorial
Working for your approval
John Oliver Costello Chairman Editorial Board
The latest Tender Price Index published by the Society of Chartered Surveyors shows that tender prices fell in 2007, mainly in the latter months of the year. The index for the second half of the year shows a decrease of 4.5% over the first six months and there is a 4.3% decrease for the year as a whole. The Index numbers since 1998 are as follows:
1998 1999 2000 2001 2002
First half Second half 100.0 103.8 108.6 116.1 121.7 130.7 132.2 136.9 133.9 130.1
2003 2004 2005 2006 2007
First half Second half 127.2 129.3 135.3 139.4 142.6 144.7 146.7 151.7 152.0 145.2
The Index is the only independent assessment of construction tender prices in Ireland. It is compiled by the quantity surveyor members of the Society based on actual tender returns for non-residential projects during the period in question. It is based on predominately new build projects with values in excess of €0.5m and covers all regions of Ireland. 155.0 150.0 145.0 140.0 135.0 130.0 125.0 120.0 115.0 110.0 105.0
2H07
1H07
2H06
1H06
2H05
1H05
2H04
1H05
2H04
1H04
2H03
1H03
2H02
1H02
2H01
1H01
2H00
1H00
2H99
1H99
100.0
2H98
of SCS affairs. In her first major interview since she took office, she outlines her immediate priorities. Her grasp of the issues augurs well for the SCS. To those of us close to the issue, it has been evident that there are problems with the proposed new Property Services Regulatory Authority Bill. However, for the first time to my knowledge, these problems are elucidated with a forensic eye for detail by Dr Brian Hunt, Head of Public Affairs with solicitors Mason Hayes+Curran. Sections 60, 61, and 62 of the proposed Bill present major problems for our profession and we need to influence the debate on these issues urgently. The Building Control Act provides for the registration of titles of quantity surveyor and building surveyor. Conor Hogan outlines how to register for the titles on page 26. Participation by members is one of keys to the future health of our Society. It is encouraging, therefore, to read in the news section of activities both at AGMs and in the regions. Given that 2007 was a record year for the number of probationers sitting the final assessment, it is evident that the Society is fundamentally in good health. We hope that the improvements we are attempting to bring to you in the SCS Review are fully and properly reflective of that good health.
1H98
Welcome to the first of the newlook editions of the SCS Review. As you will read on page 12, there is a new approach to our publication. We hope you like it and are engaged by its contents. It’s welcome, too, to the new President, Sean McCormack, who writes of the challenging times ahead for the Society – particularly of the task of managing client expectations with well reasoned advice, while also providing the vision to see beyond current market conditions. And it is those current market conditions that are under our editorial microscope in this issue (pages 20-25). Three highly respected commentators: Rossa White of Davy; Jim Power of Friends First; and, Derry Scully of Bruce Shaw, each give their own perspective on where the economy and the commercial property sector is going. Rossa White sums up the effect of the current credit crunch; Jim Power asks and answers the question – where now for the economy?; and, Derry Scully maps the outlook for construction. These are wellreasoned and articulately argued pieces which I commend to you. Density is the topic of choice whenever Irish urban planners meet to discuss current issues. Conor Skehan brings his considerable expertise to bear on the subject when reflecting on a new urban agenda for Irish planning on pages 13 to 15. The Society’s new Director General, Ciara Murphy, brings a fresh approach to the management
The Index is therefore a measure of average price increases across differing project types and locations. It should be regarded as a guide only when looking at any specific project, as the pricing of individual projects will vary depending on such factors as their complexity, location, timescale, etc. The graph illustrates how tender prices reduced in the second half of 2007 and are now at similar levels to the end of 2005. This reflects the well-publicised slowdown in new residential construction and the consequent increase in capacity for the rest of the industry. Prices are particularly competitive at present as both main contractors and specialist sub-contractors seek to replenish their order books to allow them retain to key staff until the market improves. The SCS Tender Index will continue to monitor construction tender levels and trends. It is planned to publish the results for the first half of 2008 in the autumn.
SCSREVIEW 5
News
Honorary membership
Following the Society’s recent AGM on May 13, recently retired CEO Tony Smith was conferred with honorary membership of the Society. Having joined the Society in 1983 as CEO, Tony enjoyed a long and distinguished career spanning 25 years. Under Tony’s guidance, the Society grew from strength to strength, increasing its membership from fewer than 500 in 1993 to over 2,000 members in 2008. The Society would like to express its thanks to Tony for all his support and guidance over the years and wishes him every success in his new role as Registrar under the Building Control Act 2007.
Society elects new President Chartered Valuation Surveyor Sean McCormack ASCS, MRICS, ACI, Arb has been elected as President of the Society of Chartered Surveyors (SCS) for the year 2008/2009. He is the fifteenth President of the Society since its incorporation in 1993. Sean is currently a director of professional services at DTZ Sherry FitzGerald. He graduated from DIT Bolton Street with a BSc (surv.) degree in 1988, following which he successfully completed his APC, qualifying as a Chartered Valuation Surveyor and gaining membership of the Society of Chartered Surveyors in 1991. Sean has long experience of practising as a Chartered Surveyor and commercial property consultant and has spent the last 20 years working in the commercial property sector, with an emphasis on office property and development land over the past 10 years. On qualifying as a Chartered Valuation Surveyor, he began his career with James Adam and then moved to the Phelan Partnership, before joining the Sherry FitzGerald Group in 1993. He rapidly moved up the promotion scale and held the position of managing director of DTZ Sherry FitzGerald before setting up his own practice in 2004. He rejoined DTZ in January 2007
COBRA COBRA, the annual construction and building research conference of RICS, will be held in Dublin from Thursday to Friday, September 4-5. The conference, which was first held in 1995, allows for the presentation and discussion of the latest research in many areas such as construction management, procurement, sustainability, health and safety, and project management, to name but a few. The conference focuses on high level research, and each paper submitted is subject to a full review in order to ensure relevance. A key theme is identified at each COBRA conference and following on from this a research book is published – the RICS/Blackwells COBRA book. Authors whose papers have reflected the key theme will be given time to
6 SCSREVIEW
President Sean McCormack, left, receives the chain of office from outgoing President Felix McKenna.
when he was appointed to his current position. Sean is frequently instructed in a variety of service areas, but specialises in valuation and rent review advice. He is regularly appointed as an arbitrator or independent expert in rent review disputes. An active member of the SCS for many years, Sean served as chairman of the Society’s GP Valuation Division for the session
2005/2006 and has been a member of the Society Council for a number of years. Sean lives in County Wicklow with his wife Nessa and has four children. His son Adam is currently in his second year at Bolton Street, studying property economics like his father. Sean can be contacted at DTZ Sherry FitzGerald, Tel: 01 6399306, Email: Sean.McCormack@dtz.ie.
further develop them for the publication. Other features of the conference include allowing doctoral students the opportunity to discuss their research with their peers. A ‘Picturing the Built Environment’ photograph competition has also become a regular feature at COBRA. Students on all RICS partner and accredited courses can take part. Two best paper prizes are offered at COBRA, one for issues relating to sustainability and one for best paper judged by the conference assessment panel. COBRA also acts as a venue for regular meetings of two CIB Commissions: CIB W113: Law and Dispute Resolution and CIB W101: Spatial Planning and Infrastructure Development. For further information, please contact sbrown@rics.org.
News
Diploma award ceremonies 2008 2007 was a record year in terms of the number of candidates who undertook final assessment. In total, some 290 probationers sat for interview across ten dates in Dublin and Cork in the spring and autumn. A total of 221 were successful and, as a result of this unprecedentedly high number of new Associates, the Society held two diploma award ceremonies on April 11 and 25. Both ceremonies were held in St Stephen’s Church, Dublin 2 (popularly known as the ‘Pepper Canister’) and the awards were presented by then Society President, Felix McKenna, FSCS FRICS. In his speech to the new Associates, the President commended them on the achievement of their professional qualification and the significant effort and commitment
involved. He reminded them that the Society, like every other voluntary organisation, derives much of its strength from the efforts of its membership and encouraged them to remain connected with, and participate in, the policy development and decision-making of the Society. Of the 221 new Associates, there were 142 quantity surveyors, 71 valuation surveyors, seven building surveyors and one minerals surveyor, representing Dublin, Cork, Waterford, Cavan, Clare, Kerry, Limerick, Galway, Louth, Meath, Wicklow, Donegal, Sligo, Tipperary and Offaly. Alongside the new Associates, three DIT students received the following awards: Angela Murphy received the Austin Reddy Memorial Medal for achieving first place in the final year
Diploma award recipients, April 11, 2008.
From left: John Archer, Lisney, Cork; Regina Kelleher, Frank V Murphy & Co., Cork; and, Society President Felix McKenna.
of the BSc (Hons) in Construction Economics and Management; Labhaoise Gillespie received the Noel Dooley Burse for achieving first place in the third year of the BSc (Hons) in Construction
Economics; and, Antoine Xavier received the David Bailey Burse for achieving first place in the third year of the BSc (Hons) in Property Economics. Congratulations to all!
SCSREVIEW 7
News
REGIONAL NEWS Developments in achieved SCS recognition. The Cork region is one of the the mid west highest contributors of young The mid west is going through an unprecedented period of transformation and growth. The launch of the regeneration plan for Limerick City, the development of many new retail/commercial centres and, closest to many people’s hearts, the redevelopment of Thomond Park, are all progressing well at the moment. The mood is definitely positive in the mid west! Using this positive momentum, SCS members in the region will be glad to hear that the Mid Western Regional Committee of the SCS is now up and running. Our aim is to promote the SCS in the region by organising CPD and social events. To this end, a CPD event on ‘VAT on Property – Finance Act 2008’ took place in Limerick Institute of Technology on May 27. Further upcoming events are as follows: ■ ‘Sustainability Cost Implications for Building’, June 25, 2008, Limerick Institute of Technology, 6.30pm. ■ ‘Banking the Project in the Current Property Climate’, June 16, Limerick Institute of Technology, 6.30pm. We are working on our CPD calendar for 2008/2009 and encourage anyone who is interested in delivering or attending our CPD events to get in contact by email at margaret.flannery@ecp.ie.
Southern news The Southern Region recently had their AGM and a new Chairman, Michael Barrett, was elected. Michael, a quantity surveyor, has been Chartered since 1994, and set up his own practice in 2000, which has grown rapidly since that time. He was previously an external lecturer and external examiner for the quantity surveying degree course in CIT, which recently
8 SCSREVIEW
members to the SCS in the country. Michael will focus on developing the relationship with CIT and other third-level institutions in the region, and will oversee the active and established CPD programme that runs in the region. The committee has nine members, with Paul Hannon as Treasurer and Paul Foley as Secretary.
AGM news A number of divisions of the SCS recently held their Annual General Meetings.
Divisional chairs elected at AGMs ■ QS Division Richard Mossop
■ P&D Division Harry Lawlor
■ GP/Valuation Division Paul McElearney
■ BS Division Tony Cullen
■ Geomatics Division Audrey Martin
■ YCS Division Andrew Ramsey
Western news Now in its fourth year, the SCS Western Region maintains its continued growth with an everincreasing capacity to build on services to members within the region. This was manifest in the large numbers of students and probationers who attended the events provided throughout the autumn and spring. The cornerstone of the season’s events was the very ambitious and highly successful CPD programme that took place from September 2007 to March 2008. The committee wishes to thank all our speakers, who gave of their time so freely and generously. The committee continues to encourage new applicants for the APC and has been actively engaged in promotion and support for those required as supervisors, counsellors and assessors to ensure that there is adequate support in a regional context for those seeking advancement within the Society. The highlight of the social calendar was the highly successful charity table quiz to raise funds for the Niall Mellon Township Trust. On the night, the target of €5,000 was achieved, which is the cost for the Trust to construct a house for underprivileged people in South Africa. Many thanks to all who supported this endeavour – an enjoyable night was had by all.
Society AGM The Society of Chartered Surveyors AGM took place on May 13 at 5 Wilton Place. Outgoing President Felix McKenna thanked all Council members for their support during the year, and especially highlighted the commitment of the officers of the SCS. Felix sincerely thanked recently retired CEO Tony Smith for all his hard work and commitment to the Society over many years. Tony was made an honorary member of the Society and was presented with a certificate marking this. Mr McKenna also welcomed Ciara
Murphy, SCS Director General, to her first SCS AGM and wished her all the best for the future in her new role. Felix McKenna handed over the chain of office to Sean McCormack, who was unanimously elected President of the Society of Chartered Surveyors. The following were also elected: ■ Ken Cribbin Senior Vice-President; ■ Peter Stapleton Junior Vice-President; ■ Richard Mossop Honorary Treasurer; and, ■ Pauline Daly Honorary Secretary.
General Practice/Valuations AGM The GP AGM took place on May 1 at 5 Wilton Place. Paul McElearney was elected Chairman of the Division. The following were also elected to the committee: ■ Eoin McDermott – ViceChairman; and, ■ Dr Clare Eriksson – Honorary Secretary. Paul McElearney thanked the members for electing him as Chairman. Paul congratulated John Stewart on a very successful two years and thanked him for all his
hard work. During his term of office, Paul will be focusing on addressing the disengagement of members on the GP side of the Society. He will look to get GP members to re-engage with the Society and hopes to achieve this through better communication, publications, and a more up-todate section on the website. Paul hopes to improve the social aspect of the Division, possibly through organising lunches with guest speakers.
News
Quantity surveying AGM The QS AGM took place on April 24 at 5 Wilton Place. Ciara Murphy, Director General of the Society of Chartered Surveyors, addressed the AGM and announced that she would be putting a five-year corporate strategy in place for the Society but that, in the interim, immediate priorities had been identified, which will be implemented by the year’s end. These include a greater focus on communication between the Society and its members, the further development of CPD for SCS members, a review of the arbitration function within the Society, development of the SCS corporate governance and a remodelling of 5 Wilton Place to ensure that it creates an image of a professional property and construction body. Richard Mossop was re-elected Chairman for the coming session. The following officers were also re-elected: ■ Micheál O’Connor – Vice Chairman; and, ■ Joe Boyle – Honorary Secretary. The Chairman acknowledged the large volume of work undertaken by the committee during the last session and expressed his thanks to all individuals concerned for their hard work. He also expressed a sincere thanks to Bernard Ryan, who retired from the committee after 36 years, having been elected in 1972. After the AGM, Gerry O’Sullivan, President of CEEC and SCS representative on Construction Faculty RICS, gave a presentation entitled ‘The Construction Economist as a European Profession’. Gerry explained what the CEEC is, along with its main aims/objectives.
YCS AGM The YCS AGM took place on April 15 at 5 Wilton Place. Andrew Ramsey was elected as the new Chairman for the coming session. The following officers were also elected: ■ Kieran Curtin Vice Chairperson; ■ Yvonne Kiernan Junior Vice Chairperson; ■ Emma Dakin Honorary Secretary; and, ■ Roy Nolan Honorary Treasurer. A number of other YCS members were elected to represent their divisions on the various committees within the Society. Andrew Ramsey thanked everyone for their support in helping him to become the new Chairman and congratulated Colin on a successful session. The new Chairman will focus on raising the profile of the YCS within the Society and also on encouraging new members to join.
Building Surveying AGM The BS AGM took place on April 30 at 5 Wilton Place. Tony Cullen was elected as Chairman of the Division. The following were also elected to the committee: ■ David McCarthy Vice Chairman; and, ■ Sean Oragano Honorary Secretary. Tony Cullen acknowledged the large volume of work undertaken by the committee for the past session. He also thanked outgoing Chairman Kevin Sheridan for his hard work and for bringing a number of long running projects to a close. Finally, the new Chairman is looking forward to working with the incoming divisional committee and building on all the hard work done in the past.
Geomatics AGM The Geomatics AGM took place on April 25 at 5 Wilton Place. Audrey Martin was re-elected as Chairman, while Colin Bray was re-elected as Vice-Chairman. Andrew Dunne was elected Honorary Secretary for the Division. All other committee members remain the same. The Chairman recorded her thanks to all for their kind support throughout what was a very busy session for the division. During this session the Chairman hopes to further raise the profile of the division within the Society and also to encourage new members to join the division, which will be achieved through various promotional events to be held in DIT.
Planning and Development AGM The P&D AGM took place on April 29 at 5 Wilton Place. Harry Lawlor was re-elected as Chairman for the coming session. The following were also elected to the committee: ■ Claire Solon Vice Chairman/ RICS P&D Faculty Rep; ■ Sandy Connolly Honorary Secretary; ■ Patrick Nolan; ■ Brendan Williams; ■ Phillip Chambers GP Division Rep; and, ■ Conor Byrne Education Board Rep.
SCSREVIEW 9
News
On the move McFeely in Letterkenny McFeely Chartered Surveyors & Co. has set up a new Chartered General Practice Surveyors at Greenhill, Letterkenny, Co. Donegal. Tel: 074 911 6100 Email: info@mcfeelysurveyors.ie
Andrew O’Gorman in Cavan Andrew O’Gorman & Associates has set up a Chartered Building Surveyors practice at Drumbo, Cavan, Co. Cavan, providing building surveying services to the north east region. Tel: 049 432 7773 Fax: 049 432 7660 Email: surveys@aogorman.com www.aogorman.com
Atisreal appoints senior surveyor As part of their ongoing expansion, Atisreal has confirmed the appointment of Ross Harris (top left) as senior surveyor in their retail agency department. Formerly with DTZ Sherry FitzGerald and Bogle Estate, Ross is an experienced retail agent and his appointment reflects the further expansion of the retail agency department.
Gavin Wallace moves to Ballinrobe Gavin Wallace (centre) has recently relocated from Dublin to Ballinrobe, where he has set up a new practice – ACS Chartered Building Surveyors & Project Managers. Based in County Mayo, the practice will
10 SCSREVIEW
cover the entire western region, offering building surveying and project consultancy advice to owners, occupiers, investors, developers and managers of commercial and residential property. Tel: (094) 952 1631 Email: gavin@acssurveys.ie www.acssurveys.ie
John Kirwan moves to Sherry FitzGerald John Kirwan (above right) left Savills HOK towards the end of 2007 to join Sherry FitzGerald in Waterford. At Savills, John worked exclusively within the retail department specialising in freehold disposals and the convenience side of the retail market. Prior to joining Savills, he spent five years working as a general practice surveyor with Quinn Agnew, with particular focus on professional services and office/industrial agency. John’s move to Waterford coincided with Sherry FitzGerald’s merger with John Rohan Auctioneers. John is head of the commercial agency side of the firm, and is responsible for all commercial valuation work. He graduated from Limerick Institute of Technology in 2001 and has been a GP Probationer Member of the Society since 1999. John Kirwan Sherry FitzGerald, Manor House, Cork Road, Waterford Tel: 051 843880 Fax: 051 304333 Email: jkirwan@johnrohan.ie
Colliers Jackson-Stops – qualifications and appointments Colliers Jackson-Stops is delighted to announce the qualification of four new Chartered Surveyors within the firm. Michele McGarry, Yvonne Kiernan, Paul Finucane
and Shane Cahir all graduated as Chartered Surveyors at the Society’s graduation ceremony on Friday April 25, 2008. Michele McGarry (top left) joined
CBRE appoints senior economist
Marie Hunt, with Patrick Koucheravy (left) and Guy Hollis.
New associates Kerrigan Sheanon Newman is delighted to announce the appointment of eight new Associates to support and strengthen their existing management team. These appointments recognise the valued service contributed by these new Associates, all of whom have been
Property consultancy CB Richard Ellis has recently appointed a property economist to their wellestablished research and consultancy team. Patrick Koucheravy has an honours degree in economics from the Catholic University of America in Washington and has recently re-located to Ireland. Patrick will join Marie Hunt and her team and further strengthen the research function at CB Richard Ellis.
with the company for between five and 12 years. The new Associates are: ■ Louise Boland ASCS; ■ Paul Brain ASCS; ■ Chris Cusack ASCS; ■ Sean Durcan ASCS; ■ Michael Lambert ASCS; ■ Liam Langan ASCS; ■ Paul Lavin ASCS; and, ■ Eamon White ASCS.
News
national and international clients. Shane Cahir (left) joined Colliers Jackson-Stops in 2005, having previously worked for the property department of CIE. He specialises in retail acquisitions and lettings on behalf of national and international retailers.
the company in 2000 and has nine years experience in the Irish commercial property market. She is an associate director and recently joined the investment services team, having previously worked with the office agency team within the firm. Paul Finucane (second left) joined Colliers Jackson-Stops in August 2004 and works in the Commercial
Agency Department, specialising in industrial and office leaseholds and freehold acquisitions and disposals. Yvonne Kiernan (this page, left) joined Colliers Jackson-Stops in 2006 and is a senior surveyor in the Advisory Services Department. She specialises in valuation and rent review work, and has been involved in a number of projects for both
Lara McCarthy (right) and Stephen Shine have joined Colliers JacksonStops’ Advisory Services Department. Lara previously worked with the office agency division of another large Dublin agency and prior to this worked in residential property for over four years. She holds a BSc in property management from the University of Reading and a diploma in auctioneering and property valuation from Cork College of Commerce.
Stephen joins Colliers Jackson-Stops from the valuations department of another large Dublin agency. He holds an honours BSc in property studies from the Galway–Mayo Institute of Technology. Both Lara and Stephen will primarily be involved in valuation and rent review work within the firm’s Advisory Services Department.
APEX SURVEYS Chartered Land Surveyors GEOMATICS REALISED PLEASE NOTE THAT WE HAVE MOVED Our office
is at: Unit 78, Dunboyne Business Pa rk, Dunboyne, Co Meath
Tel: 01-6910156 Fax: 01-6910157 E: info@apexsurveys. ie www.apexsurveys.ie
Apex Surveys is a firm of Chartered Land Surveyors, in business for more than 20 years. Currently we are seeking qualified Land Surveyors with a minimum two years’ experience. Please send your application letter and CV to tom@apexsurveys.ie. We provide Control Surveys Topographical Surveys Ground Modelling Engineering Surveying Dimensional Control Measured Building Surveys Boundary Demarcation and Land Registry Mapping Legal Surveys
SCSREVIEW 11
Chairman’s report
A professional publication
Chairman of the Editorial Board, JOHN OLIVER COSTELLO, outlines the developments with, and plans for, the SCS Review. Readers will have noticed a new masthead and general design for the SCS Review in this issue. Additionally, there is a new approach to the contents of the publication. A formal Editorial Board has been put in place to plan the SCS Review. One of its first decisions has been to increase the frequency of the publication to four editions per year. Think Media Ltd has been appointed as publishers to provide the editorial, design and commercial expertise necessary to ensure that the publication achieves its potential. To members of the profession, we would very much enourage you to participate in the development of the SCS Review through contributing articles and by advertising.
Participation All members are invited to submit articles on issues of concern to the profession. All articles received will be considered for publication and judgement will be made on the basis of currency and relevancy. Submission should be made ideally via email to the in-house editorial team at Think Media. Articles should be 1,000 – 1,200 words in length, provided in a word document, and include a short decription of the author. Photographs, or other illustrations (tables or graphs), should also be emailed. Photographs should be sent as separate high resolution jpg files. Tables or graphs should be sent, also separately (not embedded), in their original format.
All this material should be sent to Paul O’Grady at Think Media Ltd (paul@thinkmedia.ie). The deadlines for the next two issues (Autumn and Winter 2008) are August 1 and November 10.
wish to communicate among the wider industry. The reality is that this publication offers unrivalled access to an exclusive and influential readership – 3,500 top professionals in the property business.
Support While the SCS Review is being produced as a membership benefit, advertising revenue will reduce the costs to the Society of its production, printing and distribution. Therefore, we would encourage you to think of ways by which you can benefit directly from advertising in the Review, including professional notices, recruitment advertisements, corporate advertising, and marketing or information campaigns which you
New phase This edition is the first in a new phase for the SCS Review. It represents a significant step forward in Society communications and a move upwards in terms of standards of materials presented to members and the wider industry. I would urge all members to seek ways to participate and support the SCS Review in the coming months and years.
Submission of articles
Advertising
■ Articles should be written in word documents and be between 1,000 and 1,200 words in length.
A new rate card has been produced for the SCS Review with prices ranging from €1,800 plus VAT for a full page down to €600 plus VAT for a quarter page. Discount is available on these prices for companies which book a series of advertisements, and the scale of the discount is related to the number of advertisements booked in the series. Full details are available from Think Media Ltd by phone on 01-856 1166, or by email, again to paul@thinkmedia.ie.
■ Photographs need to be sent as separate, high resolution, jpg files. ■ Tables and graphs also should be as separate files, in their original format. ■ Embedded files are not usable. ■ All authors should send a description, and a head and shoulders photograph, of themselves to accompany their article. ■ All material should be emailed to paul@thinkmedia.ie.
12 SCSREVIEW
Planning
Density is our destiny CONOR SKEHAN reflects on a new urban agenda for Irish planning.
Ireland’s urban areas are expanding rapidly – by some estimates1 up to 24% in the last ten years. This process is likely to continue, with the east coast of Ireland likely to be home to over two-thirds of the population within 25 years.2 Growth of urban areas brings many advantages. It creates economies of scale that support culture, specialisation and the creation of employment. Growth brings problems too, especially the type experienced in Ireland, which has followed an American model of low density, car-dependant ‘urban sprawl’ – as it is commonly known – reducing choice and identity while increasing the potential for urban decay. More fundamentally, this pattern is highly unsustainable, mostly on account of the energy required (43% of all Irish energy is used for transportation).
The compact city To solve these problems, the planning of urban areas in Ireland must address itself to the question of increasing capacity – without increasing the extent or the size of urban areas – to create more compact cities. Initially, this was thought to be possible by merely increasing density and height. Experience has now shown that a more integrated approach is required – addressing urban processes as well as urban form.3 Key issues that have emerged include the need to address mobility, instead of merely providing transportation (see Figure 1). This involves a more holistic consideration of why cities function, as well as how. Citizens’ awareness, expectations and motivation need to be taken into account so that preference – rather than regulation – leads to sustainable patterns of urban development. Nonetheless, at the heart of creating compact cities lies the need to attain much higher levels of density. Only 4,400 persons per square kilometre currently occupy Dublin city – much less in the surrounding areas. Other European cities, with very high levels of urban quality and efficiencies, have
SCSREVIEW 13
Planning
FIGURE 1: Is this spending addressing the symptoms, rather than the cause, of the problem?
much higher densities, including Barcelona (16,000), Lyons (9,500) and Copenhagen (6,000).4 Such levels of density produce the concentrations necessary to efficiently operate urban services such as public transport (including metros), waste collection, street cleaning and the provision of high quality urban amenities. Though outside the scope of this article, it is worth noting that the public debate about the need to increase densities in Dublin is, increasingly, being distracted by claims that this can only be delivered by high-rise buildings. Note that none of the cities mentioned above rely on inner city heights of more than a six- to seven-storey scale to attain these densities.
Attaining density Current models of developer-led planning in Irish urban areas are unlikely to produce the levels of density required to establish patterns of sustainable mobility. While individual sites may result in very high levels of ‘yield’, this is not the same thing as establishing the patterns of well connected land uses that are necessary over a wide area. This can only come about by changing the basis of plan preparation, away from an emphasis on use-zoning, toward the more integrated creation of networks favouring non-vehicular movement. Such plans will seek to ensure that it is convenient, safe and, ideally, pleasant to reach many of one’s daily needs without needing to get into a vehicle. In this vision of urban planning – which integrates the work of spatial planners, urban designers, transport planners and landscape architects from the outset – the city is first organised around non-vehicular routes and then around density, followed by uses. Only once these factors are properly organised is attention given to the design and layout of transportation services. As the name suggests these serve, rather than lead, planning. But even this will not be sufficient. It will also be necessary to consider matters such as the management and maintenance of these public places to ensure that they are safe, clean and animated.
14 SCSREVIEW
FIGURE 2: Analysis by Siobhan O’Dea of UCD showing areas of least convenience (low ‘connectivity’) in darker blue (left), and an examination of how many houses could not reach either shops or bus stops within a five-minute walk from home, in white (right). This lack of convenient pedestrian access to urban amenities is the principal cause of people opting to drive.
The animation of the city needs planning from the outset and continuous management thereafter. It doesn’t happen by accident. Successful experience from areas such as Temple Bar and BID5 districts in the US suggests that this involves more than just street cleaning and Garda patrols. Furthermore, planning will need to begin to engage with the control of scale by managing issues such as how (and whether) sites can be assembled and sold. We will also need to plan how, and to whom, areas are sold or let, if we are to ensure that the high levels of mixed use and animation that are now evident in Ireland’s most successful urban centres are to be replicated more widely. These types of intervention will need strong fiscal or financial incentives if they are to be acceptable. Finally, planning will need to provide the focus for a reasoned analysis of the application of certain regulations and guidelines for energy, day-lighting, apartment sizes and other design determinants. Many of these wellintentioned interventions are now recognised6 as being an obstacle to attaining the required levels of density – a much more important indicator of urban sustainability than the energy performance of individual buildings. All of these factors point to the need to adopt much more integrated approaches to the planning of urban areas. The success of a number of urban renewal areas throughout Ireland is testimony to the potential that exists where such an approach is adopted.
The Five Minute City concept The DTO has shown that over half of all car journeys in Dublin are for a distance of a mile or less.7 DIT’s School of Spatial Planning has been investigating how to reduce dependency on transport in urban areas by helping to foster higher expectations of convenience and accessibility to amenities. On the other hand, experience internationally shows that people are happy to walk for up to five minutes (but not much more) to reach urban conveniences
Planning
FIGURE 3: DIT’s Five Minute City mapping of the connectivity rating of the area from Figure 2 showing how the area scores in terms of convenience. 1 is worst and 6 is best. Analysis like this, rating houses and neighbourhoods for convenience, may create the pressure to improve designs of new areas and to identify how to improve existing ones. Such methods may help to create a market for sustainable mobility.
like public transport, shops, schools and parks. Mapping tools being developed by UCD’s Siobhan O’Dea allow spatial impediments to convenience to be identified and ameliorated to improve the marketability of areas (see Figure 2). Putting these together, DIT has proposed a concept called The Five Minute City, which involves trying to use this walking time as a basic unit for planning. In this way new developments could be tested at the design stage and given a ‘convenience rating’ – just like an energy rating – to show how much or how little residents will be able to reach without using a car (see Figure 3). The convenience rating in turn is based on a ‘Civic Charter’ that identifies what amenities and facilities should be provided at varying walking – or cycling – distances from home. These vary from being able to reach things that are basic through to being able to reach things that improve the quality of life at slightly further distances. Taken further, this concept allows areas to be mapped and rated, so that prospective buyers can examine the convenience of areas before they buy. Because ‘lack of convenience’ is the most quoted reason for re-selling properties within three years of purchase, it is believed that such awareness raising has the potential, over time, to gradually change the market in favour of areas with less car dependence.
Pedestrian access to all levels of urban amenities within five minutes of home Pedestrian access to all levels of 5 urban amenities within five to ten minutes of home Pedestrian access to urban subsistence and utilities within five minutes of home 4 Pedestrian access to urban subsistence and utilities within five to ten minutes of home 6
Pedestrian access to subsistence levels of public transport, shops, education or amenities within five minutes or less of home Pedestrian access to subsistence 2 levels of public transport, shops, education or amenities within five to ten minutes of home 1 No pedestrian access to public transport, shops, education or amenities within ten minutes of home 3
urban planning interventions. All we need to do is to marshal this experience, apply it more widely and begin to densify our cities on a larger scale. Seen in this light, density isn’t a choice – it’s our destiny.
References 1. Meredith, D. Changing Distribution of Ireland’s Population 1996 – 2006: Urban/Rural Analysis. The Rural Economy, Teagasc Research Centre Working Paper, Series Working Paper 06-WP-RE15, p.14. 2 Twice the Size? Imagineering the Future of Irish Gateways. A Report for the Urban Forum. The Futures Academy, DIT, March 2008. 3 Neuman, M., Texas A & M University. The Compact City Fallacy. Journal of Planning Education and Research 2005; 25 (1): 11-26. 4 Dublin City Council. Maximising the City’s Potential, A Strategy for Intensification and Height. Draft, 2008. 5 Business Improvement District. 6 Developer Bernard McNamara has recently claimed that yield restrictions arising from such guidelines were a significant factor in his decision not to proceed with residential PPP developments in Dublin. 7 ‘Half of all car owners drive for trips of less than 1 mile’ – John Henry, Director, Dublin Transportation Office Press Release, September 3, 2007.
Marshal and apply experience Density will only occur as a result of the adoption of radically new types of planning that are centered on measurable convenience, mixed uses and scales, new types of occupancy, innovative regulations and, above all else, much greater integration of the actions of a wide range of actors. The resultant dense, attractive, efficient urban areas are likely to be a key contributor to Ireland’s sustainability and competitiveness. Ireland has an excellent track record of imaginative, integrated high quality
Conor Skehan Conor is Head of the Department of Environment and Planning, Dublin Institute of Technology.
SCSREVIEW 15
Interview
A fresh approach The Society appointed a new Director General in February of this year. Ciara Murphy joined from the Irish Dental Association where she had been Chief Executive. PAUL O’GRADY spoke to her for SCS Review. Ciara Murphy is the professional organisations’ professional. In her still relatively short career, she has worked for the motor industry, the health service employers and the dental profession. So, while she professes to being on a steep learning curve, it’s opportune to hear her views on the Society of Chartered Surveyors (SCS).
Experience Ciara sees her role in the Irish Dental Association (IDA) as providing the experience most relevant to the post of Director General of the SCS: “It was a similar type of organisation in that it had grown substantially in a short space of time. The experience that I gained at the IDA in reviewing and revising the structures to better serve the members of the Association will assist me in my work with the Society. Is that a hint that she feels that the Society needs to change? “Well, I’ve spent the first 12 weeks here watching the structure and constitution of
16 SCSREVIEW
the Society in operation. While I haven’t finalised my views yet, it is fair to say that I do have strong views about reviewing how the SCS meets the needs of members.” How does she see that review taking shape? “The SCS has traditionally been very east-coast oriented. It’s now a national organisation and that needs to be reflected in the structure of the Society. All regions and divisions need to have a voice and those voices need to be heard and equally regarded. Also, the role of volunteers in professional organisations is changing. While it is no longer viable to ask volunteers to undertake the workload of an organisation that has a paid secretariat, the resources in any professional organisation need to be adequate to undertake what were previously perceived to be the day-to-day roles of the volunteers. Most professionals are ‘time-poor’ these days and the era of giving large chunks of voluntary time towards their professional body is coming under increasing pressure. The organisation needs to adapt to this new challenge.”
Interview
Profile of a Director General A native of Blackrock, Co. Dublin, Ciara Murphy was educated at Coláiste Íosagáin in Booterstown, and at Trinity College Dublin where she earned a business studies degree (BESS). She has worked for Inbucon, the Society of the Irish Motor Industry, the Health Service Employers Agency and the Irish
Dental Association. She joined the IDA as Membership Services Officer and rose through the ranks to become Chief Executive. She is married to businessman Simon Byrne, and has three daughters Sophie (13), Naoise (10), and Ellie (5).
Priorities
Legislation
The key challenges that the new Director General would like the Society to address this year are internal communications, and education and professional standards. The internal communications issue arises for several reasons – because it’s good practice to improve communications anyway; but also because the biggest gripe Ciara has heard so far is “we don’t know what the SCS is doing”. So, she reflects, the SCS has undersold itself, because the volume of work being carried out in Wilton Place is “overwhelming”. To rectify the situation, Ciara has already taken steps to substantially upgrade internal communications. The SCS Review will move from two issues to four issues a year. A new newsletter for the members, SCS Bulletin, will be issued four times a year and will contain coverage of Society business. The first issue has already been produced and distributed. A series of divisional e-zines are at an advanced stage of planning and, if they go ahead as planned, will be issued eight to ten times a year, depending on the need. The website is also under review to ensure that members can easily and efficiently access the information they require. While this is a busy programme of communications activity, the new Director General also plans to have a comprehensive survey to allow members to express their views and expectations of the Society. On the education and standards front, the Society is currently testing a new CPD tracking system which is designed to allow members to track their CPD status. The current requirement on members of the Society is for 60 hours CPD every three years. The intention is to launch the tracking system fully this autumn. On the broader CPD front, Ciara notes that while there is already a good lecture-based programme, as well as the annual conference and specialist symposia, all of which qualify as CPD, the Education Board established a CPD Working Group to review the provision of CPD and ensure that it meets the needs of members.
As evidence of the need for an increased lobbying effort, Ciara points to the Property Services Regulatory Bill 2008, which is about to go before the Oireachtas this autumn. It will have a major impact on members of the GP/Valuation division as it provides for a new licensing authority for anyone involved in buying or selling property. Ciara comments: “While the SCS is broadly supportive of the Bill, we have some concerns and these warranted a submission to the Department of Justice. In particular, the Society delegation highlighted the fact that the Bill does not acknowledge the existence of the Red Book and that it puts a new definition of a valuation in place”. Membership of the Authority and the lack of reform measures in the area of gazumping in the Bill are also a concern to the Society.
Strengths Coming into the Society with a new and fresh perspective, Ciara Murphy is impressed by the influence of its members. “Chartered Surveyors are perceived as having high standards of education and as adhering to proper regulations. For example, the fact that the Red Book is recognised internationally for valuation standards ensures that the opinions of Chartered Surveyors are highly regarded throughout the industry.”
Observations Any newcomer to the Society is likely to have observations that may be instructive for members. Ciara’s observations so far include: “The Society is a recipient of huge levels of good will and the dedication of members and major employers is overwhelming. Whatever role members take in the Society, they take it very seriously and it’s a huge credit to them and a great basis for the operation of the Society. It’s a challenge to continue to facilitate that dedication and make the life of those volunteers easier”. Ciara also recognises the very valuable relationship that the Society maintains with the RICS, and is looking forward to the development of that relationship in the coming years. Additionally, Ciara sees plenty of opportunities to develop the Society: “The SCS is well positioned as an authoritative voice in the construction and property sectors, and that voice needs to be heard”. Another strength of the Society is, according to Murphy, the extremely dedicated staff, and she describes the Wilton Place office as a great place to work.
Future It’s evident that Ciara Murphy brings a fresh perspective and focused mind to the position of Director General of the Society. She comes across as seriously engaged in and by her job, committed to achieving the goals set by the Society and determined to succeed. With her experience of re-invigorating the Irish Dental Association, it’s likely that members of the Society will see some significant and beneficial changes over the coming months and years.
Weaknesses Offsetting that considerable advantage of a good reputation is the fact that Ciara perceives the Society as having not exerted its influence to the extent it might have. There are, she says, good reasons historically for why the Society may not have been fully engaged in lobbying previously. “However, I do think it is time to develop the brand of the profession and to identify areas where we can effectively lobby Government and other stakeholders,” says Ciara, identifying Justice, Environment and Finance as being Departments with which the SCS could usefully develop long-term relationships.
Paul O’Grady
Paul is a journalist and a Director of Think Media.
SCSREVIEW 17
Legislation
Wrong numbers
6 0 6 61 2 BRIAN HUNT raises concerns for the commercial property sector about sections of the proposed new Property Services Regulatory Authority Bill.
The Government’s most recent legislative programme indicates that the Property Services Regulatory Authority Bill will be published during the summer. While a draft version of the Bill was made available at the end of 2006, no further version has been made available since. The Society of Chartered Surveyors made a detailed submission to the Department of Justice, Equality and Law Reform setting out its views and concerns in relation to the Bill, as well as proposing a number of amendments aimed at improving it. What follows is an assessment of some of the key provisions of the Bill, which, if enacted, are likely to impact on the day-today work of Chartered Surveyors.
agents; the need for a code of ethics for auctioneers/estate agents; the need for a body to regulate auctioneers/estate agents; and, the desirability of a system for the investigation of auctioneers/estate agents. The 42 recommendations contained in the Report are very much focused on the regulation of auctioneers/estate agents and letting agents, particularly in relation to the residential market. The role and function of Chartered Surveyors and commercial property transactions would appear to have been beyond the remit of the Review Group. The Review Group appears to have been very much concerned about the vulnerability of the average consumer in conducting property transactions in such a heated market. It therefore comes as some surprise to see that, in a number of respects, the Bill seeks to introduce radical changes to the way that the commercial property market operates. If the Report, with consumer protection for the residential market as its focus, has formed the basis of the draft Bill, it is very difficult to understand the basis for the Bill venturing, as it does, well beyond its remit of consumer protection in the commercial property market.
Report of the Auctioneering/Estate Agency Review Group The thinking behind the Bill is said to have been based on the implementation of the Report of the Auctioneering/Estate Agency Review Group, which was submitted to the Minister for Justice in July 2005. The Review Group was tasked with responsibility for carrying out a review of “all aspects of the auctioneering profession in Ireland and equivalent services in appropriate comparable jurisdictions”. The Review Group was also asked to make recommendations in relation to the qualifications of auctioneers/estate
18 SCSREVIEW
The Bill: a closer look Section 2 – definitions of terminology A number of the Bill’s provisions seem to either intentionally or inadvertently encompass the activities of the commercial property market. The scope of many pieces of legislation is limited by the breadth or narrowness of the definition of core terms used in the legislation. The
Legislation
Property Services Regulatory Authority Bill is no exception to this. The first point where the Bill makes a foray into the realm of the commercial property sector is in section 2. Section 2 contains a wide definition of “land”, such that its subsequent use in the legislation will include commercial land. Section 2 also contains a very wide definition of the term “management company”. It seems fair to assume that the management companies at which this provision is principally directed are management companies of apartment blocks and housing estates. However, the scope of the definition is such that it will also capture housing estates that contain some commercial element, such as shops and offices, etc. In addition, the definitions of “property management services” and “property service” appear to be unduly wide and, as a consequence, will include such services involving commercial property. Three provisions of the Bill – sections 60, 61 and 62 – are of most concern in relation to the impact that they could have on the commercial property sector.
60
Section 60
Section 60(1) requires a licensee to provide a valuation (“advised value”) of the property in question within seven days. Section 60(2) defines the term “advised value” and envisages that a single, fixed value of a property would be provided or that, alternatively, a valuation range would be provided. It envisages that the value would be determined by reference to the licensee’s reasonable estimate, based on experience, which “a willing but not anxious buyer” would pay. In circumstances where a price range is provided, the maximum permissible difference between the two figures must be no more than 10% of the lower figure. In plain terms, section 60(1), when read in conjunction with section 60(2), requires a valuer and every selling agent to somehow apply formidable foresight in determining with unrealistic precision the price at which a property will sell on the open market. The contrast between the internationally recognised best practice, as provided for in the Red Book, and the terms of section 60, is striking. The thinking behind section 60 seems to be informed by a belief that the task of valuing a property is an exact science, determined through the application of fixed mathematical formulae. There are real questions as to how workable section 60 can be in practice. To make section 60 even more unpalatable, the failure of the valuer to predict with absolute precision the price at which a property will sell on the open market may then be punishable under section 62, as will be discussed later.
61
Section 61
Section 61(1) provides that an auctioneer/estate agent must not discuss or publish an estimate of the sale price that is below the advised value. The effect of this provision is to force a vendor to offer a property for sale at a price determined by a third party, and not at a price or level of their own choosing. Through the operation of this section, i.e., the requirement to sell at the advised value, a vendor is effectively being forced to reveal the price at which they will sell the property. This drastically reduces the prospect of the vendor ever achieving a price that is much above the advised value and points towards an unprecedented degree of State interference in a person’s established right to sell their own property at a level of their choosing.
Another effect of section 61 is that if a vendor is finding it difficult to sell a property at the advised value, the vendor is precluded from having the auctioneer discussing the possibility of a lower sale price with any prospective purchasers. It seems that section 61 will be particularly unworkable in the context of transactions involving commercial land, particularly as a large portion of transactions in the commercial property sector are carried out by investment bodies, pension funds and financial institutions in what is termed an “off market” setting. A prohibition on discussing figures, as is provided for in section 61, looks set to severely restrict the operation of this market. In addition to constituting an unprecedented level of State interference in the property market, there are grounds to suggest that this measure risks being incompatible with the Constitution.
62
Section 62
Section 62(1) will allow the newly established Property Services Regulatory Authority (of its own volition, or on foot of a complaint) to require a licensee to justify a previously supplied “advised value” relating to a property. If the regulatory authority believes that the advised value was unreasonable, it may reprimand or warn the licensee. Clearly, by providing an “advised value” under section 60, a licensee is exposing themselves to potential liability under section 62, and details of the imposition of any sanction must be published. It seems reasonable to suggest that such a provision looks likely to lead to conflict between the regulator and a licensee.
Exclude commercial sector? If the Property Services Regulatory Authority Bill is enacted in its current form, it looks set to fundamentally alter the task of a surveyor, and the status and role of a valuation, in a property transaction. Individually and collectively, sections 60, 61 and 62 of the Bill should be of major concern to Chartered Surveyors and other persons engaged in providing valuations. These provisions seek to turn established practice on its head, without, it seems, a full awareness of the consequences that such fundamental changes will have for the property market. In view of the fact that the Report of the Auctioneering/Estate Agency Review Group cannot credibly be said to be a basis for the application of these measures to the commercial property sector, it is not unreasonable to expect that radical reforms of the scale provided for in sections 60, 61 and 62 would have been preceded by, and be wholly grounded upon, a report from a commission or consensus of economic consultants with a particular expertise in the Irish property market. Recognising that this may not now be done, there are compelling reasons for suggesting that the Bill should, at a minimum, be amended to exclude the commercial property sector from its remit.
Dr Brian Hunt
Brian is Head of Public Affairs at Mason Hayes+Curran.
SCSREVIEW 19
Banking
Crunching the numbers ROSSA WHITE sums up the effects of the current credit crunch on the commercial property sector. The most severe credit crunch in the history of modern finance has intensified. Stage one saw banks rein in lending to each other, not knowing who was left with investments in financial instruments that went sour. Stage two is perhaps even more pernicious: banks stem the flow of credit to the real economy due to their own funding issues and decreased risk appetite. Since March, Irish businesses have been feeling the full effects of that squeeze.
The problem of finance The property industry relies heavily on credit. Borrowed funds facilitate deals that take a bet on future prospects, often with long lead times. Equally, investments in the second-hand market typically require huge leverage thanks to the vast sums required to purchase existing commercial buildings. Hence, when credit dries up, new development stalls and transactions slide. Development finance is now very hard to come by. If you are a new player, forget it. Even for established players, planning permission, existing cash flow from other sources, and a compelling business is the bare minimum needed to access funding. As for the investment market, the global de-leveraging trend is being mimicked in Ireland. Transactions have dried up because bank loans for highly leveraged deals are not accessible. The first half of 2007 was the high watermark, just as it was for credit markets globally in this cycle. Irish investment market transactions were down
20 SCSREVIEW
42% year on year in the first quarter. However, a little like the residential market in the year to summer 2006, the commercial property market went too far in the year to last summer. Commercial property rental yields were pushed to extremely low and rich levels. Since late 2005, yields have not made sense when compared with funding costs. However, the equivalent phenomenon was experienced in housing too; asset markets tend to overshoot and stay there for longer than many expect. Two factors kept the commercial market hot for an extended period: easy credit and the voracious appetite for property investments, by retail funds in particular. By the second quarter of 2007, average yields on commercial property in Ireland had plunged to 4%, according to the Investment Property Databank (IPD). In retail the yield was a remarkably low 3.4%. By the end of June 2007, five-year swap rates were 4.8%. Add at least 1-1.5 percentage points of bank margin on the deal and the effective borrowing rate was over 6%. From a cash flow perspective, deals do not square up.
Unknown quantities Rents have continued to rise, but prices are now falling. We just do not know by exactly how much commercial property prices have dropped already due to the dearth of transactions. IPD data showed a 3.3% quarter on quarter fall in the first three months of 2008, the biggest sequential slide on record. The true figure, if property was actually bought and sold at a reasonable flow, is probably closer to 10%. The difficulty is that the yield adjustment does not compensate for the funding mismatch. Due to revised European Central Bank interest rate expectations, five-year swap rates are up 50 basis points in three months.
Banking
Furthermore, we know that banks are adjusting margins upwards on term loans due to the squeeze on their margins from higher money market rates for short-term (overnight to one-year) money. Prices are set to slip by another 5-10%.
Effects on commercial building If prices are falling, what is happening to the volume of new building? According to the PMI construction index, commercial new building activity has contracted since the start of the year. That drop in the commencement of new projects was most marked in April, when the index read 39.2 versus a break-even reading of 50 – the lowest in five years. The lack of availability of development finance is leading to the delay, postponement or shelving of new projects. A repeat of the reaction of new homebuilders to changed conditions in the autumn of 2006 is possible. Private non-residential building firms may cut new starts out of necessity, because of lack of finance, but also thanks to the bleaker short-term macro outlook. There is a precedent: these big firms cut back quickly for a one-year period that spanned most of 2001 and early 2002. However, plenty of work has been started and not yet completed. In fact, the pipeline of commercial building due for completion looks worryingly full. Take the Dublin office market for example. Another 350,000 square metres of space are due to be added this year, up from 250,000 in 2007. Only about 20% of that is pre-let. Given weaker labour market conditions, particularly in financial services, the vacancy rate, currently at a cyclical low, is set to rise. Perhaps of more concern is the situation with regard to out-of-town retail space. The quantum of retail park space rose an incredible five-fold in 20032007 and the stock is set to increase further, albeit at a much slower pace, in the next 18 months. Yet the 25-44 years population group grew only 16% in that four-year period and DIY sales, for example, expanded by 40%.
Worryingly, retail parks are tied closely to the health of new housing. Tighter mortgage availability is constricting housing demand. When people stop buying new homes, they also forsake the new durable goods and furniture associated with that purchase. Electrical goods fell 9.5% in March compared with the same month a year ago, while furniture sales shrank 12.8%. At least DIY sales are still growing, but tighter consumer credit may have some effect on this category over the next year.
Future prospects Apart from some genuine unease about the pace of office building and the negative implications for retail parks, we don’t anticipate a widespread occupancy problem in commercial property. However, the probability of a more serious shakeout has nudged up. Bank lending remains the crucial variable. If credit tightens further to good quality consumers and businesses, the multiplier effect on the real economy would be significant. It is worth noting that the Central Bank’s survey of financial institutions, taken at the end of March, showed that Irish credit conditions had tightened more than in any other Euro zone country. If businesses cannot access credit to invest, they won’t grow their workforces, creating a negative feedback loop for the economy.
Rossa White
Rossa is Chief Economist with Davy Research.
SCSREVIEW 21
Economy
Where now for the economy? JIM POWER offers an overview of the current Irish economic situation, and possible developments in the coming years. The past year has certainly witnessed a marked change in the tone of the Irish economy. While GDP expanded by a robust 5.3% in 2007 and GNP by 4.5%, growth slowed sharply as the year progressed. In the final quarter GDP expanded by 3.5%, compared to 8.3% in the first quarter, while GNP growth slowed from 7.1% to 1.2%. The economy has continued to lose momentum in the first half of 2008 and growth forecasts for the year have been revised progressively downwards in recent months. The consensus at the moment is that Irish GDP will expand by between 0% and 2% in 2008, which would represent the lowest growth rate since 1991. Consumer confidence weakened sharply throughout 2007 and this trend has continued into 2008. The deterioration in consumer confidence over the past 18 months has been driven by rising interest rates, falling house prices, a steady flow of high profile job losses around the country, high food and energy costs, and a generally high rate of increase in the cost of living. In a general sense, consumer psychology has been undermined by a greater level of economic uncertainty than has been present for more than 15 years.
has started to reflect the lower levels of confidence (Figure 1). In the first quarter of 2008, the volume of retail sales was 0.2% lower than the first quarter of 2007. The key weaknesses are in car sales, furniture and lighting, and electrical goods. These last two components reflect the weakness in housing activity.
Consumer confidence Despite the decline in consumer confidence, consumer spending remained strong throughout much of 2007, but over the past six months spending
22 SCSREVIEW
FIGURE 1: Consumer Sentiment Index.
Source: IIB Bank/ESRI.
Economy
Labour market
Credit crackdown
In line with the weakening trend in the economy, the labour market is deteriorating (Figure 2). In the year to April 2008, the number of people signing on the live register increased by 41,279 and the unemployment rate stood at 5.5% of the labour force, compared to 4.5% at the beginning of 2007. However, although the unemployment situation has deteriorated in recent months, the labour market is still strong. Ireland’s 5.5% unemployment rate compares to a Euro zone average of 7.1% and is well below the levels seen a decade ago. The main contributor to the increase in unemployment is the construction sector, where significant job losses are occurring.
Reflecting the general slowdown in economic activity, and tighter credit conditions, credit growth has also slowed sharply in the economy over the past year. In the year to March, private sector credit growth slowed to 17.1%, which is down from a peak growth rate of 30.3% in June 2006. The growth in mortgage credit slowed to 11.6%, down from a peak growth rate of 28.1% in March 2006.
Exchequer returns The exchequer returns to the end of April 2008 show that the state ran a deficit of €3.7 billion in the first four months of the year, compared to a deficit of €638 million in the same period in 2007. The total tax take is running 6.5% behind target, with stamp duties down by 42.4% and capital gains tax down by 40%. The housing market is clearly continuing to have a significant impact on tax revenues and this does not look like improving anytime soon. The Government had forecast an exchequer borrowing requirement of €4.9 billion for the full year. The deficit for the full year is likely to be substantially larger, reflecting the ongoing weakness in tax revenues.
End of the housing boom The key story in the Irish economy at the moment is undoubtedly the ending of the housing boom and the associated economic consequences. A decline of 10,000 in the number of houses built knocks up to 1% off economic growth. This sharp slowdown in house building was inevitable, as house building had reached unsustainable levels in recent years. However, the adjustment to more normal housing market conditions is exacting a heavy price, and in particular is having a very negative impact on unemployment, tax revenues, consumer sentiment, and economic activity in general. However, the necessary but painful housing market adjustment is being accentuated by the deterioration in the US economy and the recent strengthening of the Euro, which is further undermining the competitiveness of the Irish exporting sector. At the same time the sub-prime crisis is continuing to unfold and is creating major economic and financial uncertainty and volatility.
Where do we go from here? Manufacturing and services
Inflationary pressures have remained strong in the economy in the first half of 2008. The headline rate stood at 4.3% in April but has averaged 4.6% in the first four months of the year. The key drivers of inflation at the moment are food, energy and mortgage costs. In the year to April, food prices increased by 8.4%, energy costs increased by 7.3% and mortgage interest costs increased by 15.5%. All of these factors are directly outside the control of the Irish authorities, but will still make the negotiation of a new national wage agreement quite challenging.
2008 is certainly turning out to be a challenging year for the Irish economy. Unemployment is rising, consumer spending is weakening, house prices are still falling and house building activity remains very weak. Given the domestic housing market adjustment and the more difficult external environment as a result of the sub-prime crisis, it is looking likely that 2009 will also be a challenging year, and a return to more normal economic conditions may not be seen until later in 2009 and into 2010. GDP looks set to expand by around 1.5% in 2008 and 2.9% in 2009. The ESRI’s latest medium-term review is projecting annual average GNP growth of 3.75% out to 2015. The ESRI recognises clearly that “very real difficulties” are currently being encountered by the Irish economy, but believes that the economy will eventually rebound and return to its medium-term growth path. These difficulties include the ongoing painful re-adjustment in the housing market, heavy job losses in the construction sector in particular, falling house prices, very weak levels of consumer confidence, surveys showing that
FIGURE 2: Unemployment rates.
FIGURE 3: Purchasing manager indices.
The purchasing managers’ survey of activity (Figure 3) suggests that activity is weak in both the manufacturing and service sectors of the economy at the moment. Both indices are reading significantly below 50, which means that activity is contracting.
Inflation
Source: CSO.
Source: EcoWin Reuters.
SCSREVIEW 23
Economy
manufacturing and service sector activity is declining, an appreciating exchange rate, and a difficult US economic background. The ESRI argument is that, if managed properly, the current economic slowdown should pass and the economy should recover fully in the early years of the next decade. Indeed, the ESRI is forecasting average GNP growth of 4.1% between 2005 and 2010, 3.8% between 2010 and 2015, and 3.5% between 2015 and 2020. However, the clear message is that in order to achieve these growth rates, proper management is essential. Delivery of the NDP, control of public spending, improved public services and investment in education are all essential.
Mapping the outlook
Developments in housing and construction All available evidence so far in 2008 continues to suggest very difficult housing market conditions: ■ mortgage credit growth slowed to 11.6% in March, compared to 28.1% two years earlier. In the first quarter of 2008, mortgage credit outstanding increased by €2.6 billion, compared to €4.3 billion in the same period in 2007 and €5.6 billion in the first quarter of 2006; ■ average house prices fell by 8.9% in the year to March; ■ house completions in the first quarter of 2008 were 30% lower than a year earlier; ■ new home registrations in the first quarter were 68.3% lower than a year earlier; and, ■ house commencement notices in the first two months of the year were 51.5% down on a year earlier. With such a low level of commencements, it is likely that completions in 2009 will be very weak once again. Total completions this year are likely to be around 48,000, but based on registrations and commencements so far this year, completions could be as low as 40,000 in 2009. It is likely to be 2010 before any real life returns to the housing market, in terms of prices and building activity. The excess supply in the system will have to be eradicated, and that is likely to take until the second half of 2009. In terms of other construction activity, it is likely that retail development could ease somewhat against a background of slower consumer spending and excess supply, but in the medium term, the outlook for retail development is likely to be strong. Ireland’s young and growing population is consistent with a vibrant retail sector. Lower cost retailers in particular are likely to continue to invest in the Irish retail landscape. For the construction industry, times are now certainly more challenging, but the economy will emerge from the current difficulties. While activity levels in construction are not likely to return to the levels seen in recent years, a more stable and sustainable level of activity is likely. For Irish construction companies, there has to be a major opportunity to export their services and expertise to the emerging economies.
Jim Power
Jim is Chief Economist with Friends First.
24 SCSREVIEW
DERRY SCULLY argues that although the economic outlook has worsened, it’s not all doom and gloom.
Unfortunately, since the beginning of the year we have seen a steady deterioration in both the Irish and world economies. The reasons for this have been well documented – the continued slowdown in residential construction at home and the global credit crisis and rising oil prices worldwide. Projections for Ireland’s economic growth this year have been falling steadily and are now at between 1% and 2%. Inflation has remained high, Government revenues are running well behind budget, unemployment is rising and there is no sign of an imminent reduction in interest rates. A total of 14,010 residential units were constructed in the first three months of this year and the latest projections for Irish house building predict that the 2008 total will be only 45,000 units, with some commentators projecting even less. The recently published Ulster Bank Construction PMI Index shows that all construction sectors – housing, commercial and civil engineering – are contracting, while the CSO Monthly Index of Employment in Construction is down almost 12% on 2007 levels. So, will the doom and gloom merchants finally be proved correct? Well, yes and no! There is no doubt that we are in a difficult business environment, but closer examination of the statistics shows that things are not quite as bleak as portrayed by some commentators. This year’s monthly totals for new house completions were approximately 5,000 for January and February and 4,000 for March, which was a short month with Easter falling early. If these trends were to continue the annual number of completions could be 55,000, still well down on the 78,000 units built in 2007 but not nearly as bad as predicted by some.
Building
for construction
The Ulster Bank Construction PMI Index shows that all sectors of construction are contracting, but there may be some solace in a levelling off of the rate of decline in April for housing activity. Unfortunately, however, activity in both the commercial and civil engineering sectors declined further in the month.
procedures, and has awarded contracts for several new roads projects. Given the deteriorating public finances, perhaps it is not surprising that there is an increase in PPP projects in the offing, although, again, these are proving slow to actually come to market. Projects in the pipeline include Metro North, the National Concert Hall, the Abbey Theatre and further educational bundles at both second and third levels.
Where the action is There is some evidence that non-residential activity is taking up part of the slack within the industry. While house building is down, there has been an increase in expenditure on repair and improvement works. On the commercial front almost 45,000 square metres of offices were let in Dublin in the first quarter of 2008, higher than the average for the previous five years. There are now 420,000 square metres of new office space under construction and 236,000 square metres of this will be complete by the end of the year. This, in turn, will require fitting out, which will provide further opportunities. The retail market also continues to provide significant opportunities for construction with significant schemes planned in Dublin and throughout the country. In Dublin the Point Village Centre is on site, while the Arnotts Northern Quarter development and the Dublin Central scheme on O’Connell Street are going through the planning process. The industrial market is somewhat slower than in recent years with a slowdown in inward investment projects, but recent announcements of expansions by Elan and Pfizer show that the bio-pharma area continues to thrive. Turning to the public sector, there is general disappointment at the slow progress of rolling out new projects. The Department of Education has appointed design teams to some school projects but very few projects have been advertised/awarded by the Department of Health or the Office of Public Works. On the infrastructure front, the NRA has been at the forefront of Government authorities in implementing the new GCCC contracts and
Looking for the silver lining In summary, there is a significant slowdown in construction this year, particularly in new residential building, but there are opportunities elsewhere. These opportunities are, however, increasingly hard to bring to fruition, as banks tighten their lending criteria and subject potential projects to much closer scrutiny. The remainder of 2008 is likely to be a period of consolidation, while 2009 could be even more challenging unless there is an increase in confidence levels fuelled by an eventual end to the credit crisis and hopefully a decrease in interest rates. The good news, however, from clients’ perspectives, is that the slowdown in construction has made the market much more competitive and there is good value to be had as contractors and sub-contractors compete to fill order books and retain key staff. Construction prices are currently falling, with straightforward projects on greenfield sites proving particularly competitive.
Derry Scully FSCS FRICS Derry is Chairman of Bruce Shaw Partnership, Dublin, and former President of the Society of Chartered Surveyors.
SCSREVIEW 25
And finally…
Hang on a second – are you registered? CONOR HOGAN takes members through the proposed process of registration of title under The Building Control Act. Legislative background The Building Control Act 2007 has provided for the registration of the use of the titles of quantity surveyor (QS) and building surveyor (BS). The Minister for the Environment, Heritage and Local Government, John Gormley, recently announced the implementation date of the sections of the Act relating to QS and BS registrations as May 1, 2008. The Society of Chartered Surveyors (SCS) is named in the Act as the registration body.
Registration boards As outlined in the May edition of the SCS Bulletin, the legislation provides for the establishment of eight boards. The composition of these boards includes a chairperson (who will be legally qualified), a number of surveyors (who will be appointed by the registration body), and a number of lay nominees (who will be appointed by the Minister). At the time of writing, the Society has yet to receive the Minister’s nominees. Upon receipt of the Minister’s nominees, the Society will proceed to establish each of the boards and initiate the process of registration of quantity and building surveyors. The Society has already consulted with the other surveying bodies to nominate members of the profession for consideration for appointment by the registration body. The Society has likewise invited members of the SCS to put their names forward for consideration and has received a
26 SCSREVIEW
significant number of names. The boards to be established for both quantity and building surveyors are as follows: ■ An admissions board – to include a legally qualified chairperson appointed by the Minister, three surveyors (quantity or building as appropriate to the board) to be nominated by the registration body, and four persons who are not of the surveying profession, to be nominated by the Minister. ■ A technical assessment board – to include a legally qualified chairperson appointed by the Minister, three surveyors (quantity or building as appropriate to the board) to be nominated by the registration body, and four persons who are not of the surveying profession, to be nominated by the Minister. ■ A professional conduct committee – to include a legally qualified chairperson appointed by the Minister, five surveyors (quantity or building as appropriate to the board) to be nominated by the registration body, and six persons who are not of the surveying profession, five of whom to be nominated by the Minister, and one of whom to be nominated by the Minister with the consent of the Minister for Enterprise, Trade & Employment.
■An appeals board – to include a legally qualified chairperson appointed by the Minister, two surveyors (quantity or building as appropriate to the board) to be nominated by the registration body, and three persons who are not of the surveying profession, two of whom to be nominated by the Minister, and one of whom to be nominated by the Minister with the consent of the Minister for Enterprise, Trade & Employment. The Act also provides for the establishment of codes of professional conduct standards for both quantity and building surveyors, which have been agreed with the Competition Authority and are available for perusal on the SCS website – www.scs.ie. Tony Smith, the former CEO of the SCS, has been appointed as Registrar of the registration body by the Society. A decision has been taken by the SCS to locate the registration function of the Society outside Wilton Place, and details of this will be made known in due course. An agreed budget has also been allocated by the Society to the registration body for the year ahead.
How do I register? It is anticipated that the application process to register will be conducted online via a dedicated page on the SCS website. There are 17 different routes for quantity surveying and 15 for building surveying, and each route has its own form of application. At the time of writing, it is expected that advertisements will be placed in the national newspapers during July/August 2008 seeking applications from QS/BS who wish to use the title. Members of the Society of Chartered Surveyors will also be notified via email.
Do all quantity and building surveyors in the practice need to register? Legal opinion was sought from senior counsel as to who is subject to the requirement to register and, more particularly, whether every person practising as a quantity or building surveyor, or working as a qualified quantity or building surveyor, or in a quantity or building surveyor practice, whether or not working as a quantity or building surveyor, is obliged to register. In summary, the advice to the Society is that it is expected that most persons qualified to describe themselves as a quantity or building surveyor would register and that furthermore, it would not be advisable for any such person not to register, in particular if they are working in a firm of quantity or building surveyors. As such, the Society of Chartered Surveyors is recommending that all such persons should register. Any further queries in relation to the registration of title process for quantity and building surveyors should be referred to the Registrar, Tony Smith, Email: tsmith@scs.ie.
Conor Hogan FSCS FRICS
What is the registration fee? Section 62(3) of the Act provides that any fees payable to the registration body shall not be specified without the approval of the Minister. The Society is in the process of seeking a meeting with the Minister in this regard and will be in a position to advise members of the registration fee in due course.
Conor is a Director of Joseph C Hogan & Sons and is a former President of the Society of Chartered Surveyors.
SCSREVIEW 27
Time for a change‌ CNP Ireland are proud to announce that we will shortly be introducing a new name, and a new identity. One thing that won’t change is our commitment to our clients, and we will continue to offer the same excellent range of services, based on providing key advice on a rapid, accurate and cost effective basis. If you would like to see what we can offer for your next building project, please contact us at CNP Ireland +353 (0)1 634 1000 or email info@cnpireland.ie
www.cnpireland.ie