RENTAL values for industrial property should rise by at least 10 per cent this year and demand is set to continue, a leading property adviser has said.

However, he has warned that a new system of getting goods out of the country must be found if Ireland is to cash in on the next wave of demand.

Fintan Gunne, managing director of Gunne estate agents, told a conference on property finance the current outlook for industrial properties is buoyant. He said people who need industrial property are looking to buy rather than rent as it is a better option because of low interest rates.

"for the investor, the overall return on industrial property in 1996 was excellent - 20.6 per cent - and everything points to industrials being one of the strongest performers this year."

He said more big-name multinational companies are likely to locate in Ireland thus driving demand for industrial premises. But, he said, the next wave of industrial development will demand a much more efficient and sophisticated distribution and logistics infrastructure than there is now.

"Dublin is the national distribution hub but our downtown streets are already at well over 90 per cent of capacity," said Mr Gunne. "If Ireland is to maintain the high ground industrial development, we must, with the greatest urgency, find innovative solutions to our 19th century distribution system.

He said that "hopefully" by the year 2000, the west of the city will have a specialised centre for national distribution equipped with state-of-the-art container handling and logistics technology, with fast access to Dublin's port and airport.

"It will be capable of switching goods speedily, between road and rail and will track every consignment to its destination with the reliability and accuracy which tomorrow's economy will require as standard."

Mr Gunne told delegates traffic and traffic movement have played a major role in Dublin development. He said out-of-town shopping centres would also be a key factor.

He pointed out that the MSO has created three shopping centres on a very large scale. "As the peripheral development continues to grow, there is a drive on to revitalise the city centre," he said.

Although Dublin city centre is fighting back, he claimed there are indications that the Henry Street/ Jervis Street area is approaching saturation point with the same volume of spending being spread among more outlets. Yet, he said, Dublin is not over-shopped - "not just yet".

Mr Gunne said changes in retailing were most likely to adversely affect older, smaller, shopping centres. They are now under a threat and if somebody was offering one such smaller centre at a very good price at the moment to one of our clients, we would have to advise caution," he said.

Mr Gunne forecast that strong competition will continue in the retail sector this year, because many of the British retailers which have set up in recent years are trading so well. News travels fast, he said, adding that other UK retailers will come to Ireland over the next 18 months.

He said the economic outlook for Ireland is good and this can only help the property market. He said that over the next decade, 25,000 millionaires will be created. "As Ireland gets wealthier and more, millionaires are created, many more people will be seeking to invest in property," he said.

Mr Gunne predicted that rental values will increase this year and yields should harden by half a point. "Industrial and retail warehousing are the best prospect but, like all solid investments, are much harder to source."

However, he cautioned against in investing purely for tax breaks. "Not all tax-designated properties are wise investments," he said. "Unfortunately, Irish people will try to avoid paying tax if they can, at all costs.

He added that investment in "unsound propositions" is not only bad for the individual investor, it is had for the whole market.