UCC Economist Frank Crowley said the lack of apartment building in Cork should be a “big worry” for policymakers at the moment, as thousands are needed to meet the city's needs.
He made the comments following the news that a plans for a major housing development in Cork city have been scrapped, to be replaced by more office space.
More than 200 build-to-rent apartments were to be constructed on the site of Carey Tool Hire and the former Sextant Bar, Albert Quay, in a 25-storey apartment block.
But developers JCD Group now say that the housing development is non-viable financially and instead intend to build a 16-storey office block on the site.
“Cork should be building thousands of apartments each year to meet Ireland 2040 population expectations and to create a more liveable and sustainable Cork,” Mr Crowley told.
In terms of achieving that, the economist said the incentives currently available to developers were 'just not adding up'.
“The costs for apartment building are clearly outweighing the returns that can be generated by building offices or for developers to concentrate on building more traditional house types, or indeed to speculate on rising land prices in Ireland’s cities and towns,” he said. “Something has to be done to tackle apartment underdevelopment.
"If we do not want to reduce regulations, then the answer has to lie somewhere around VAT and taxes charged on apartment buildings.”
The UCC economist warned that as a county, Cork cannot afford continued sprawl out from the city.
Explaining the change from residential to office, JCD said they appointed Deloitte to review the cost of the proposed development in comparison to its valuation on completion.
Their report concluded that the rents required to make the project viable would mean that a two-bed apartment would cost almost €2,800 per month to rent, which the developer believes is not sustainable in the Cork market.
Discussing the implications of building more office space in an era that is seeing a substantial amount of working from home (WFH), Mr Crowley said there was a risk being taken, but it was largely calculated.
“I think developers are taking the risk that the WFH shift is transitory," he said. "Whilst I think we will see a more blended model between WFH and office life, I think city centre business development and the death of the office is not upon us, in my opinion.
"I don’t think Covid- 19 is going to overthrow the economic forces that have been increasing the demand for urban life for the past 60 years.”