Office of the Comptroller and Auditor General - Press release VFM examination report on The provision and Management of Industrial Property

Press release issued on 28 October 1998

Value for Money Report on the

Provision and Management of Industrial Property

The Comptroller and Auditor General, Mr. John Purcell, has carried out an examination of the provision and management of industrial property by IDA Ireland, Shannon Development and ?arás na Gaeltachta. At the end of 1996, the three Agencies were responsible for portfolios of industrial property valued at ?274 million. These comprised 2,200 hectares of land and 1.2 million square metres of factory space.

The examination looked at the extent to which their portfolios are managed economically and efficiently by the Agencies. It also sought to establish whether industrial property is acquired, developed and disposed of in an economic and efficient manner.

A report on the examination is being presented to Dáil ?reann today. The main findings of the examination are summarised overleaf.

For further information about the report contents, please contact:

Fergus O’Brien at (01) 679 3122

Main Findings

Industrial Land

  • Scarcity of land for industrial purposes would inhibit industrial development. Consequently, the Agencies buy and develop land to ensure there is an adequate supply to meet emerging demand. Almost a third of the land held by IDA Ireland and Shannon Development was not required because it was in the wrong place or was unlikely to be used in the foreseeable future. These Agencies also had too much land in some locations and too little in others.
  • The prices paid for land acquired by the Agencies in 1995 and 1996 were reasonable compared to market rates. When selling land, the prices achieved by IDA Ireland and Shannon Development were strong relative to market rates. (?arás na Gaeltachta had no land sales in the period examined.)

Industrial Buildings

  • By June 1998, occupancy levels ranging from 82% to 86% had been achieved by the Agencies. Despite having a significant amount of vacant space available, the Agencies state that there is a shortage of space in certain areas targeted for development.
  • The costs of provision of industrial buildings were found to be within a reasonable range, apart from three projects commissioned by ?arás na Gaeltachta which had very high specifications.
  • IDA Ireland, which has a policy of selling off its industrial buildings, achieved relatively low sales prices because of the age and condition of the buildings sold and in some cases, because of lease conditions which fixed rents at low levels.
  • The property holding costs (maintenance, security, rates, insurance, etc) incurred by the Agencies were higher than the costs normally incurred by private sector developers. This was partly attributable to factors such as the reluctance of the Agencies to pass on all costs to their tenants, the high standard of specification required for industrial promotion purposes and the age of buildings.

Monitoring Performance

  • The Agencies do not have adequate systems to monitor the performance of their investment in industrial property. Furthermore, they do not set a target rate of return on this investment. Because development objectives are seen as more important, property is used, in effect, to provide hidden subsidies to some industrial projects. Therefore the level of economy and efficiency achieved by the Agencies in relation to property cannot be determined.

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The contents of this page were last updated on 26/09/03