The cynics have always contended that if you can see half a dozen cranes from your office window, then you are probably looking at the next property recession.

It is far too early to issue a similar warning. Although cranes are piercing Dublin's horizon, speculative development remains at a relatively low ebb in the city and suburbs. And just to make sure things don't get out of hand, the banks have tightened up on lending policies in the knowledge that history has a nasty habit of repeating itself.

Office schemes, now the main source of building activity, were once restricted to specific areas of the city, but with four local authorities in competition for commercial developments and rates revenue, it is open season for new blocks.

It is hardly surprising therefore that planning permission has either been sought or been granted for another 11 million sq ft of space in the Dublin area even though the total amount built since 1962/63 is only 19 million sq ft. The scenario could have disastrous consequences for the property industry. However, the reality is that most of the space will not be developed in the foreseeable future as long as the banks call the shots.

A good percentage of the proposed space is earmarked for industrial estates, where the zoning clearly envisages that new office blocks should be used for high tech activities such as data processing, software development, telemarketing and research and development - in fact anything except pure office administration. Dun Laoghaire-Rathdown County Council has attempted to get around this restriction by amending its development plan to allow it to grant permission for offices in Sandyford Industrial Estate.

The original high tech definition for new office buildings is now being overlooked by some developers and tenants, and it seems only a matter of time before rival office developers seek the intervention of the courts to have the matter clarified once and for all.

With the banks anxious to restrict their exposure in the office market, developers are desperately trying either to persuade institutions to pre-fund schemes or, alternatively, to negotiate a pre-let. Once a decent tenant is signed up, the funding problem can be overcome.

The bottom line is that the banks control the office market. If they refuse to fund a scheme, it can't go ahead. They can also determine what happens to other office developments to which they may have already loaned money.

Most schemes currently under way are concentrated in the south Dublin suburbs, particularly Sandyford and Leopardstown. In these areas alone there is planning for around 4.8 million sq ft. Letting agents are quoting rents of anything from £14 to £18 per sq ft, but with construction costs rising almost on a monthly basis, prime offices are now costing up to 50 per cent more to build than two years ago, and rent levels in these new schemes need to be moving up.

That may not happen once there is competition for tenants. The real danger is that if newly completed blocks are not letting fast enough, some of the more vulnerable players may opt to cut rents - a sure recipe for disaster.

The consortium developing the 1.7 million sq ft Central Park scheme in Leopardstown clinched the biggest office letting of the year (it let 263,000 sq ft to Eircell) by offering an attractive package of incentives which includes a three-year rent free period and a higher standard of fit out. Once these concessions are costed, the initial rent could work out as low as £7 per sq ft. However, the deal is clearly a good one for the promoters because it gives them a high profile launch customer for Dublin's biggest office scheme.

The real loser was Green Property, which had been in negotiations with Eircell for months even before planning permission came through for Central Park. Green subsequently agreed to let around 180,000 sq ft to the Internet bank Enba, but this deal also fell through.

In the city centre, there has been no shortage of customers willing to rent the limited volume of office space available. The dot com companies have been largely responsible for dictating the pace of rents, paying as much as £40 per sq ft for individual floors in good locations. Any slippage by the dot com companies in the US could have serious consequences here but, for the moment, the owners of office blocks are continuing to show faith in the industry - even at a time when AIB has been sending out confusing messages, announcing early in the year that it planned to set up an Internet bank to support its share price. Last month it changed its tune and reported that it would not be promoting an Internet bank . . . in support of its share price.

Little wonder that Enba also had second thoughts about moving into a huge new building in Sandyford.

At this stage most of the institutions have sufficient weighting in offices and those still on the lookout are reluctant to pay a market yield for anything rented over £35 a sq ft.

The heavy concentration of funds in the office sector over the past year was due primarily to the fact that it offered more investment opportunities at a time when rents were rising faster than in either the retail or industrial sectors. Offices produced overall returns of 32.2 per cent for the 12 months up to the end of September.

There are now strong indications that the prime retail rents will be next to move up. Zone A rents on Dublin's Grafton Street are clearly lagging behind those in Henry Street and even Mary Street.

However, this is solely due to the lack of transactions to provide rental evidence in Grafton Street. The irony of the present situation is that Zone A rents are now higher in Mary Street than in Grafton Street so it is only a matter of time before the premier street takes the lead again and sets Zone A rents of over £300 per sq ft. The recent letting of a new store opposite the Jervis Centre on Mary Street surprised the market by reporting a new Zone A benchmark rent of £292 per sq ft. The process of catching up is only beginning.

With so few retail investment opportunities around (watch out for the dogfight between the institutions to fund part of the proposed shopping centre in Dundrum) the fund managers are increasingly turning their attention to retail warehousing, now that planners have finally endorsed this concept. The largest development under way, a 190,000 sq ft scheme near Swords in north Dublin, is being funded by the Irish Pension Fund Property Unit Trust and Irish Life Assurance Company. The initial yield will be over 5 per cent.