PRIME office space, fuelled by demand, is likely to rise from current levels of £18 per square foot to as much as £24 per square foot by the year 2000, a leading estate agent has predicted.

Killian O'Higgins, a Sherry FitzGerald director, said a greater proportion of employment will be based in offices as new jobs created take advantage of the well-qualified workforce. He said the property market will continue with a period of "sustainability and stability".

Mr O'Higgins based his comments on an analysis of economic data relating to the property industry, which was prepared by John FitzGerald, Research Professor with the ESRI.

He said the 1995 Labour Force returns indicated that while 45.5 per cent of jobs have no real impact on commercial property, 25 per cent affect offices, 16 per cent and 13.5 per cent retail.

Mr O'Higgins was one of the speakers at a conference in Dublin organised by Sherry FitzGerald, which provided detailed economic analysis and predictions for the commercial and residential markets to the year 2000 and beyond.

Research by his firm on the office market shows that approximately 120 square feet of office accommodation is required per job created. It found that 449,000 square feet of office accommodation was constructed each year on average between 1962 and 1996.

The projections for net space required in coming years are 787,000 square feet this year, slipping back to 393,000 square feet in 1998; 650,000 square feet in 1999 and 670,000 square feet in the year 2000.

Mr O'Higgins told the conference there is continuing pressure on yields due to ongoing private sector interests in property investment. He said the current yields of 6 to 6.5 per cent could fall to 5.75 per cent.

Mr O'Higgins maintained that in the retail sector, the increase in personal consumption over the next few years means that far from being overshopped, there is scope for a further increase in the retail floor space in the Dublin area.

While some of the smaller, more traditional shopping locations adjacent to the new shopping centres may be adversely affected, Dublin can accommodate the new centres proposed at Quarryvale, Swords and Dundrum. There is also a need for a large-scale centre in the south-east of Dublin adjacent to the new Southern Cross route, he said.

Research by Sherry FitzGerald in the retail sector shows the total stock of space in Dublin is currently about 10.5 million square feet, excluding banks, building societies and pubs.

Although shopping centre floor space increased by 25 per cent last year, this represented an increase of only 10 per cent in total retail space for the Dublin area. The growth in consumption projected by the ESRI up to the year 2000 can be partly accommodated by increased sales per square foot in existing detail outlets.

However, Mr O'Higgins estimated there is potential for an additional 735,000 square feet of retail accommodation in 1997; 631,000 square feet in 1998; falling to 238,000 square feet in 1999 and rising again to 244,000 square feet in the year 2000.

The demand for retail space continues to be fuelled by the British multiples, he said. Unless they buy out existing local operators, they can effectively only expand into the Irish market by opening shops in new centres, he said.

Mr O'Higgins predicted continued demand for new retail developments and upward pressure on rental levels in the established prime locations such as Grafton Street.

He said rents in the street will rise from a current level of approximately £175 per square foot for Zone A to a likely £200-£210 per square foot and possibly in excess of £220 per square foot by the year 2000.

The fixed supply of prime retail investments and the potential for rental growth will continue to put downward pressure on yields, which may fall from a current level of about 5 per cent to 4.5 per cent in the near future, according to Mr O'Higgins.

Employment projections show a potential increase in industrial employment of 6.5 per cent to the year 2000.

Although there is approximately 23 million square feet of industrial space currently in Dublin, with a vacancy rate of 6.7 per cent, the majority - 70 per cent - of this stock was built pre-1981 and is not suitable for modern industry nor as institutional investments, Mr O'Higgins said.

Following a survey of overseas companies which have set up in Ireland, and a comparison of the total employment in the industrial sector with the stock of industrial space in 1994, Sherry FitzGerald estimated 350 square feet of industrial space is required for each new industrial job.

Based on these figures, the new additional floor space required in 1997 is projected at 694,000 square feet; at 560,000 square feet for 1998. In 1999, the requirement will fall further to 465,000 square feet and to 475,000 square feet in the year 2000. This does not take into account major projects such as Intel and Hewlett Packard.

With the construction of the M50 and other road improvements, locational requirements for industrial property will be less specific, according to Mr O'Higgins.

Mr O'Higgins estimated about 3,000 acres is available for industrial use in Dublin. This could provide for an additional 45 million square feet of space, which is 200 her cent more than the existing stock. However, much of this land is unserviced, or in unsuitable location.

Mr O'Higgins said the Blanchardstown corridor is the most likely location for substantial industrial development in the coming years due primarily to the availability of serviced land, which has been proven by IBM's decision to locate in the area.

Prime industrial rental levels are currently at £6 per square foot. This is likely to rise to £7 or possibly £7.50 per square foot by the year 2000. However, rental growth will have to be tempered due to the substantial availability of zoned industrial land and rental levels may not rise significantly in advance of inflation.

Industrial yields have seen the greatest fall in recent years resulting in higher price increases than in other sectors of the commercial property market.

There is a strong demand for owner occupation of industrial property, which reduces the availability of institutionally acceptable investment properties. Traditionally, the institutions have reduced their yields rather than enter into speculative development and Mr O'Higgins expected prime yields to fall further from a current level of 8.25 to 8.5 per cent to 8 per cent and possibly 7.5 per cent.

On the residential sector, Mr O'Higgins' forecast that second-hand house prices wills increase by 7 to 9 per cent this year and 5 to 8 per cent from 1998 to 2000.

Professor FitzGerald said the continuing dominate the under-30 age group in the population would be a deciding factor in the future of the residential market. He forecast demand nationally for approximately 25,000 house completions per annum in the period 1996-2001, with completions increasing to 27,500 in the period 2001-2006.

The period 2006-2011 is likely to show some fall off as the number of young people in Ireland begins to gradually fall, he said. Professor FitzGerald believed this will bring completions to just less than 25,000 per annum.

On the issue of EMU, he said interest rates would be lower if Ireland was to join monetary union, than if it were to remain outside.