O2 is to to get a new €77m HQ in Dublin's docklands and Dell is to lease anoffice block in Cherrywood, south Dublin.Jack Fagan reports on a year which saw business stage a recovery

Two of the biggest property deals of 2004 have come near the end of a year marked by the runaway success of the retail sector, a pick-up in the office letting market and the investment of €2.5 billion in the UK by Irish investors.

The Irish Property Unit Trust (IPUT) is to pay €77 million to fund a new headquarters building for O2 at Sir John Rogerson's Quay in the Dublin docklands.

And in another sign of recovery in the long over-supplied Dublin city office market, Dell is to lease a new 12,077 sq m (130,000 sq ft) office block under construction at Cherrywood Business Park off the N3 in south Dublin.

The O2 transaction will push the overall turnover in commercial property this year to well over €800 million and more importantly will provide further encouragement to office developers to gear up for another round of speculative schemes now that the vacancy rate in the city has dropped to about 8.4 per cent.

IPUT is no newcomer to pre-funding arrangements, having already agreed in September to invest €45 million in a new headquarters building for top law firm Dillon Eustace next to the Ferryman pub at Sir John Rogerson's Quay.

That deal gave the pension fund a return of almost 5 per cent but in the 02 transaction, it will have to settle for an initial return of 4.5 per cent with an enhanced reversionary potential.

O2 will be paying a rent of per €344 per sq m (€32 per sq ft) for most of the 13,006 sq m (140,000 sq ft) under a 25-year lease with no break options. The telecoms company agreed the deal with a consortium of the Kelly, McCormack and Flynn families who acquired the development site from Carroll Transport.

It is understood that under an ongoing arrangement, Mr Jimmy Carroll will receive 26 per cent of the rental income.

Mr Liam Carroll's success in letting 12,077 sq m (130,000 sq ft) to Dell will also be seen as a major coup given that the suburban office market is still in the doldrums with a vacancy rate of over 29 per cent. Dell is moving its operations from Bray to Cherrywood where it occupies an adjoining block of 5,574 sq m (60,000 sq ft).

The company will be paying a rent of €215 per sq m (€20 per sq ft) and will apparently have break options every five years.

While the suburban office market is struggling to get back on its feet, retail has been the star performer with returns of 19.8 per cent for the 12 months up to the end of September compared to 10.9 per cent for the industry as a whole.

Letting activity on Dublin's Grafton Street has never been busier as a range of multiples decided that they no longer wanted to pay inflated rents on what is the fifth most expensive shopping street in the world. However, that dubious reputation is not expected to dissuade either Zara or H & M from pitching for the old Bewleys restaurant when it comes on the letting market over the next few weeks.

Leading developer Castlethorn has had no difficulty finding top international tenants for the €250 million Dundrum Town Centre which is due to open for business in March. The general expectation is that it will quickly emerge as the premier shopping centre in the Dublin area with its better mix of tenants and superb communal facilities.

Cork too is to get a major shopping centre at Mahon while Newbridge has already enlisted Debenhams as anchor tenant for a regional shopping centre due to open in 2006.

Development work is under way on not one but two shopping centres in Drogheda to cater for a much increased commuter population.