An announcement on the cap on retail warehousing is likely before the end of this year - and it's anticipated that furniture giant IKEA will be allowed to build a once-off superstore. Gretchen Friemann reports.

It's increasingly likely the Government will opt to accommodate a once-off IKEA superstore in Dublin without abolishing or extending the current cap on retail warehousing.

That's the growing consensus among a number of property experts, indigenous retailers and industry lobbyists ahead of the Minister for the Environment Dick Roche's announcement on the floorspace cap review, which is due out by the end of this year.

The Swedish furniture giant promised to create 500 jobs and invest €100 million in its Irish venture if the Government facilitated planning for one of its typical sized stores of around 28,000 sq m (301,389 sq ft) of retail space on a site near the M50 at Ballymun in north Dublin.

Without such a guarantee, the privately owned group threatened to export the jobs and investment to Northern Ireland.

It was this fear that sparked an early review of the guidelines, which were introduced in 2001 to protect local retailers from multinationals establishing out-of-town hyperstores.

The review's findings were initially scheduled to be published by autumn but industry sources now believe an announcement will be made by the end of this year.

However, despite widespread disenchantment over rising prices in the Republic, there has been little pressure on the Government to dismantle the current legislation restricting retail warehousing to 6,000 sq m (64,583 sq ft).

Business groups, such as IBEC and ISME, the Consumer Association and local retailers and their lobby groups have expressed trenchant opposition to any alteration to the floorspace cap, arguing that larger multinational outlets would precipitate job losses and destroy town centres. Both Fianna Fáil and Fine Gael have supported these arguments.

Now lobbyists and local retailers are increasingly confident there will be no move on the retail warehouse guidelines, despite indications of support for an increase from the Tánaiste, Ms Harney. However, they believe the Government will concede a once-off IKEA superstore.

According to a property expert, who wished to speak anonymously, "the consensus view is that the Government will have to bow to the pressure to allow IKEA to open a store here. Otherwise they risk consumer anger if the company follows through with its threat to locate up North".

He supports the lifting of the floorspace cap but argued that the power of the lobbyists for the large retailing groups is "probably sufficient to keep the restrictions in place. But if they do allow IKEA in, they will have a hard job explaining to other retailers why they can't expand their operations into larger stores."

The building materials group, Grafton, owner of a DIY chain and, subject to a study by the Competition Authority, the new parent of Heaton's DIY stores, Atlantic Homecare, has consistently voiced its opposition to any change in the floorspace cap.

Woodies' CEO, Mr Ray Colman, reiterated this view, describing any increase in the cap as "unfair to all those retailers who have adapted their operations to comply with the guidelines". Industry sources claim Grafton has dispatched powerful lobbyists to persuade the Government to maintain the cap but Mr Colman declined to comment on this allegation.

He did, however, stress that Woodies is not attempting to block an IKEA invasion, arguing the Swedish retailer is not a direct competitor.

He said: "We do not regard IKEA as a competitor of ours; they are a flat pack furniture business without a core DIY offering."

He claimed IKEA was "never catered for" under the retail planning guidelines of 2001 and pointed out that, if the Government wanted to facilitate the Swedish group, it could easily do so by introducing a separate provision for flat pack furniture stores under the current legislation.

"This can be done without changing the floorspace cap on retail warehousing. That was put in place for five years and it would be unfair on retailers here to change that mid-stream just to accommodate a large multi-national."

Such a view has been well publicised by the Irish Hardware and Building Materials Association of which Grafton is a member. In its submission to the previous Minister Martin Cullen, the group claimed IKEA has often modified its store sizes in other countries.

It points out that three-quarters of the IKEA stores in Hong Kong are under 6,000 sq m (64,583 sq ft) of retail space with another four under 8,000 sq m (86,111 sq ft) in Australia.

But the group has previously dismissed any suggestion it would operate an Irish outlet of under 26,000 sq m (279,861 sq ft), describing anything less than that size as "not a profitable enterprise".

Such a large-scale outlet would yield massive commercial rates for local county councils with some already moving to anticipate a change in the guidelines.

Recently, Fingal County Council amended its draft county development plan to facilitate an IKEA-type retail store a few miles from Ashbourne, near the Meath/Dublin border.

Property experts believe other local councils will make similar provisions if IKEA receives the green light from the Department of Environment.