Tax breaks fuel car-parks drive

GENEROUS tax breaks and a strong demand for city-centre spaces is driving the rush to build multi-storey car-parks.

Activity in this sector will see the number of spaces on the northside of Dublin city virtually doubling during the next 12-18 months.

At least six car-parks are either under construction or have been granted planning permission, and several more are in the pipeline.

The 1995 Finance Act included several tax incentives for multi-storey car-parks, extending the reliefs enjoyed in designated areas to schemes outside such parts. Tax reliefs include accelerated capital and double rent allowances. The tax breaks expire in 1998.

"Some car-park plans would have been abandoned, but for the tax allowances, says Larry Kane, managing director of Irish Estates, which manages a range of properties, including car-parks and office blocks.

"Tax incentives are certainly influencing interest in car-park developments," says Kevin Hallahan, senior engineer, roads, streets and traffic for Dublin Corporation.

The tax benefits allow a developer to write off the cost of building the car-park against tax. If the owner leases the car-park to a tenant, that tenant gets a tax allowance equal to double the amount of rent paid to the landlord each year for 10 years.

There is around 5000 spaces in multi-storey car-parks in Dublin city. Car-parks currently under construction include Jervis Shopping Centre (750 spaces); Clarendon Street (back of Brown Thomas), which will have 380 spaces; and Schoolhouse Lane/Mansion House (350 spaces)

Others which have been given planning permission include Penneys (400 spaces at the Parnell Street end of Jervis Street); Arnotts, which will build 200 spaces on the Adelphi cinema site; and the College of Surgeons, which has permission to build a multi-storey car-park at Mercer Street/York Street.

Another factor fuelling the boom in car-park building is the ever-rising number of people who hold driving licences.

For example, in 1989, approximately 1.2 million people held driving licences, but by 1995 this figure had risen to 1.6 million.

Ironically, car-park operators say car-ownership rates are still quite low in Ireland compared to other countries. In Ireland there are 300 cars per 1,000 people, whereas in Britain the figure is 500 cars per 1,000.

Dublin certainly needs more car-park spaces. The Dublin Transport Initiative (DTI) report spoke of demand for car-parking increasing by 40 per cent over current levels by the year 2011, says Liam Keilthy, chief executive of Park-Rite, which manages car-parks on behalf of Irish Life, and secretary of the Irish Parking Association, an organisation set up to work for better standards of car-parking in Ireland.

Last year's Finance Act also included several stipulations on planning and charges. For example, the charge and hours of operation must encourage the use of the car-park for short-stay rather than long-stay parking. "Our policy is to get cars off the streets, our aim is to make on-street more expensive than off-street parking," says Kevin Hallahan.

It is estimated that there are approximately 150,000 car-parking spaces in the Republic, of which around 40,000 are run on a commercial basis. Car-parking both in the North and the Republic generates about £40 million of retail spending a year.

Free on-street car-parking in the State totals to about 25,000 spaces, off-street car-parking in offices, factories etc amounts to 40,000 spaces and there is around 30,000 spaces in areas such as bus stations and hospitals.

Metered parking generates considerable revenue for local authorities and in Dublin, for example, it is said to bring in around £3 million per annum.

Dublin city councillors recently sanctioned an increase in metered car-parking, raising the tariff from 80p to £1 per hour. However, the increase will entail expensive readjustment of parking-meters.

By contrast, current average charges are £1.00-£1.20 per hour in city-centre multi-storey car-parks. However, operators say people are not price sensitive and have decided where they will park before they even leave home.

It isn't only private developers who are building car-parks; several local authorities, including Sligo and Dungarvan, have invited proposals from the private sector. Operators say that for car-parks to be viable, a scheme needs around 350 spaces. They are expensive to build at £6,500-£7,000 per space, excluding site costs.

"However, there is no shortage of takers to buy them when they come on the market," remarks one property source. Recently it emerged that an £8 million car-park at the rear of Brown Thomas in Grafton Street will be developed by a small property company and Anglo-Irish Bank Corporation. The 380-space park will be completed in October.

When a car-park is built the deal is usually structured so that all the tax benefits can be taken out, - in other words a developer, operator and owner can reap the maximum tax breaks.

The Brown Thomas deal, for example, will allow Anglo-Irish to avail of more than £6 million in capital allowance's. As part of the deal Brown Thomas will retain ownership of 25,000 square feet of storage, 3,500 square feet of retail space and 7,000 square feet of offices.

Although car-parks are full at peak times - generally regarded as around 2 p.m. each day, operators say they are not used to capacity for 50 per cent of the time. However, occupancy rates are rather misleading because spaces are more valuable to operators if there is a quick turnover of cars utilising them.

Some people question whether all car-parks can trade profitably. "Undoubtedly, some car-parks will face significant pressures," says Liam Keilthy. He points out that although demand for spaces is increasing, this does not mean that demand for pay parking is also rising.

"For example, demand for parking in Dun Laoghaire is increasing, but there is plenty of free parking in the area."

Operators say car-parks are not only expensive to build, they can be expensive to operate and maintain to a high standard. "Car-parks have to be viewed as a long-term investment," says one operator. "You cannot convert them into anything else without knocking them down - they are not like other buildings."