Retail warehousing is growing very fast but there are signs that the market in some locations may be heading for overheating. Fiona Tyrrell reports

With Ireland now firmly on the radar for UK DIY and chain stores, retail warehousing is the fastest growing area in the Irish property market.

As major UK chains vie to get into Ireland, rents in retail warehousing have steadily grown in the last two to three years with some high-profile retail warehousing in Dublin now commanding prices in the region of €376 per sq m (€35 per sq ft).

Rivalry among the four top DIY retailers - Homebase, B & Q, Woodies and Atlantic Homecare - has led this growth.

It is no surprise that the competition is intense with B & Q's unit in Liffey Valley proving to be one of the chain's best performers in Europe.

Earlier this year an industry report estimated that the DIY market is worth up to €500 million a year.

Now most major retail warehouse schemes work off the back of a major DIY anchor.

"Five years ago you almost had to sell your soul to get an anchor tenant. Now, with the competitive DIY market, they are much easier to come by and they are usually the first deal done," says Karl Stewart of DTZ Sherry FitzGerald.

Anchor rent deals in Dublin are priced between €235 and €258 per sq m (€22 to €24 per sq ft) and other units are priced between €258 and €323 per sq m (€24 to €30 per sq ft), according to Cormac Kennedy from CB Richard Ellis Gunne.

Retail space at Park Development's planned scheme off the Carrickmines intersection of the M50, which has Woodies as an anchor tenant, is priced at €377 per sq m (€35 per sq ft), according to Mark Reynolds of Hamilton Osborne King (HOK).

There is keen interest in the scheme with two to three bidders on every unit, he said.

Rental prices in Cork are not far behind Dublin. The Mahon Point scheme is commanding €345 per sq m (€32 per sq ft) and over. Schemes in Galway can reach over €323 per sq m (€30 per sq ft).

Provincial towns have not missed out on the action and many have more than one retail scheme under development.

Retail schemes located in Athlone, Drogheda, Naas, Navan and Kildare are commanding anything in region of €172 to €280 per sq m (€16 to €26 per sq ft).

With a lot of retail parks in the pipeline, the growth looks set to continue next year.

For local authorities that are inundated with planning applications, retail parks are attractive. They are easy to build and generate a lot of commercial rates.

Despite the strong supply, demand questions are being asked about some developments located in areas that may not have the demographic mass or profile to support such developments.

Three retail warehousing developments were recently approved for planning in Naas. One major retail park is already sited in Athlone but two more are on the cards. Two major schemes are being developed in Drogheda.

"The worry is that there could be an issue with oversupply, but I don't think we have reached that point yet. There are still a lot of towns that could do with the right retail park in the right place," says Karl Stewart.

The boom was not confined to DIY, fashion chains are keen to get in on the action. Two rival fashion retail schemes are under development in the Blanchardstown area of Dublin.

Green Property is devoting a new extension of its retail park entirely to fashion, while the Westend Retail Park is being converted into a fashion complex.

Fashion parks are likely to be the big movers in 2005 with other parts of the country following the lead being taken in Blanchardstown, according to Cormac Kennedy.

Meanwhile, the news that the Department of Environment may make a special exemption to the cap on retail warehousing in order to pave the way for the Swedish furniture giant Ikea to open an outlet in Ballymun could really shake things up in the retail warehouse industry, especially if US shopping club Costco decides to follow suit.