CBRE’s latest research highlights the dramatic turnaround in the Irish market in the latter half of 2008 as economic conditions deteriorated sharply and consumers reined in spending.

According to head of research Marie Hunt, this decline in retail sales activity will undoubtedly continue in 2009. For various reasons, the outlook for expenditure growth in Ireland in the short to medium term is weak. With the economy in recession, many retailers will find 2009 challenging considering the significant pressure on cash flows.

The exception looks likely to be value-led retailers who will continue to gain market share. It is inevitable that some retailers will cease trading over the next 12 months as conditions deteriorate further and CBRE expects to see some further consolidation occur in the Irish market as some retailers capitalise on this.

From a property perspective, a number of retailers have postponed location decisions and expansion plans until economic conditions improve. Transactional activity in the retail sector will therefore be subdued this year. That said, those in a position to sign deals in 2009 will be able to secure very attractive terms and conditions and CBRE expects to see a number of retailers taking advantage of the relative value on offer. With landlords having to be more accommodating in order to attract tenants to their schemes and generate cash flow, CBRE expects to see shorter lease terms being agreed this year, particularly in secondary schemes and locations.

Where appropriate, the agent also expects to see an increase in the number of turnover-based transactions negotiated in 2009. Tenants are all looking for better deals and expect landlords to deliver reduced rents, more break options and in many cases capital contributions to secure lettings. Considering the imbalance between supply and demand in some locations in Ireland it is inevitable that retail rents will experience some decline over the course of the next 12 months.

An inevitable result of the slowdown in the retail sector is a decline in the quantum of new retail schemes being developed which in turn will reduce supply for those retailers looking to expand. While a large number of new retail projects are being put on hold indefinitely as a result of scarce and costly finance, rising yields and tough occupier markets, it is encouraging that a number of significant schemes around the country are proceeding regardless. The fact that John Lewis recently announced plans to open its first Irish store in the Dublin Central scheme in Dublin city centre is a vote of confidence for a sector where CBRE believes the medium term prospects remain good.

The research concludes that the economic climate for retailers over the next few years will be challenging with significant pressure on costs and discretionary spending compromised as the rate of unemployment increases. Despite the backdrop, CBRE expects to see some new entrants to the Irish retail market in 2009 with a number of new US and European retailers still interested in locating here and seeing this as an opportune time to conclude transactions. The reality is that deals will still be agreed despite the short term outlook for the economy and the retail sector. Those retailers that adapt their business to the changed environment will trade through this cyclical downturn regardless. One positive outcome of the current difficulties will be a more collaborative approach between landlords and retailers going forward.

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