OPW is shedding its traditional image and adopting a more commercial edge

The Office of Public Works takes a decidedly commercial approach when negotiating rents, buying or leasing properties and extending its portfolio. So says the Minister of State in the Department of Finance with responsibility for the OPW, Martin Cullen.

"That department more than any other operates in the commercial world," he says. "Because we are such a big player, people have a constant, daily involvement in the market and take a commercial approach."

The popular impression of the OPW, he admits, links the organisation to the repair of national monuments using an army of OPW labourers, but this view is significantly dated.

The OPW has been restructured into six "business development units", each one a self-contained service provider "capable of operating with companies in the private sector", says Mr Cullen.

While it is responsible for the maintenance of national monuments, the OPW now contracts out virtually all of this work to private companies. It also uses outside expertise when necessary, he says, although it does have in-house architects, engineers and specialist craftsmen.

The OPW is directly responsible for maintaining all State properties, including departmental buildings, Garda stations, office blocks and prisons, explains Tom Sherlock, principal officer in the OPW's property management services unit. These properties are actually vested in the Minister for Finance but the OPW is responsible for keeping them in shape.

The monuments are vested in the Minister for Arts and Heritage and there are a few exceptions associated with the Department of Defence, for example barracks and some lands.

The total accommodation under its control stands at 11 million sq. ft. "This includes everything, big, little and small," Mr Sherlock says. The office accommodation component is between 6.5 million and seven million sq. ft, with about 45 per cent owned and 55 per cent leased, he says.

Trends in the current market suggest that one should "build if you can or own your properties", says Mr Sherlock. This was echoed by the commissioner of the OPW, Sean Benton. "In general, our approach is where we can, we own the property, particularly when you have a use that is going to be long-term," says Mr Benton. Short-term requirements are usually filled with leased property, the trick being to "get the balance between leased and owned".

There were times, he admitted when the OPW could be forced into the market, for example as was reported in The Irish Times only a few weeks ago when it agreed to a record rent of £23.75 per sq. ft for office accommodation off Harcourt Street in Dublin. This Clonmel Street block was acquired for the Employment Equality Agency at short notice and with a specific geographic requirement to be met. Last year, the OPW spent £300 million on providing accommodation for Government and offices

The new inclination to establish tribunals of inquiry puts additional pressure on short-term accommodation, he says, as with the Blood Tribunal which occupied offices in Adelaide Road at short notice. "When you need accommodation overnight, you have to go to the market," says Mr Benton.

In the main, however, the OPW does very well in negotiating attractive rents for its leased properties. "If we were less careful, we would be in the market for that type of accommodation more often," says Mr Sherlock. Comparative figures show the OPW tended to come in with rents at below market trends, he says. The OPW tends to negotiate rents from a few per cent up to 10 per cent less than the rents achieved by companies, even within the same block, he says. At least part of this related to the fact that the State did not default on rent payments. This lower risk sometimes is reflected in a lower rent.

But the OPW, like most other tenants, will come under pressure from rising rents. "We are influenced by the same climate of rising rents and the lack of space as everybody else operating in the rental market. Through a combination of prudent portfolio management and as a major player with Government backing, we have consistently been able to keep our rents as low as possible," he says.

These below-market rents also help to prevent the OPW from causing the office accommodation market to "overheat", says Mr Sherlock, despite its substantial Government accommodation needs. The OPW's acquisition strategy was seen clearly last year when the Government agreed to spend £67 million to acquire 22 properties around the State in support of its decentralisation programme. The planning for this investment, Mr Cullen says, involved the OPW and the National Treasury Management Authority. "Clearly, there is now a better understanding that capital spending represents better value," says the Minister of State.

"We at all times are working to a strategy we have worked out for ourselves," says Mr Sherlock. The investment late last year meant that "the State's rent bill is down by £6 million this year and every year". Managing the State's portfolio falls to senior career civil servants with expertise and support from professional architects, valuers, engineers - structural, electrical and civil - and quantity surveyors.

There is no hesitation to seek expertise outside the OPW if it is needed, says Mr Benton. It contracts about 40 per cent of its design and architecture requirements to outside service providers. Mr Cullen strongly defends this reliance on the private sector. "You need that kind of interaction. It would be bad if it was otherwise."