Despite the highly publicised troubles of the Irish banking sector, it seems that some funding is available for further retail development.
Anglo-Irish Bank,which had provided much of the funding for retail development in Ireland over the past decade, has now been nationalised. A new top management structure has been put in place and it’s not clear yet, given the Irish government’s much greater involvement in its running, whether extra funding will be available for commercial projects. Plans are proceeding to recapitalise the two big Irish banks, AIB and Bank of Ireland. The Irish government is planning to put about €8bn into these two banks, to help free up funding for their customers.
Bank of Ireland says that while the development market is relatively quiet nationwide at the moment, as developers and prospective retailers take stock of the economic downturn, generally, funds are still available for the right projects, subject to acceptable structures.
A spokesperson for the bank says: “Terms and conditions have tightened in response to increased risk factors, including slower consumer demand, higher potential risk of tenant default and slower tenant take-up in new centres, but the bank remains committed to its core markets, including the domestic property business.”
The bank says that it will support well structured and viable proposals, but on a selective and prudent basis. It adds that the demand for development finance has lessened, with developers keen to have property pre-let rather than taking speculative risks.
The position is similar in AIB. Austin Hughes, chief economist of KBC Bank Ireland, says that the retail sector is set to become much more difficult over the next two years. He adds that the market generally in Ireland is suffering from excessive pessimism now, which is influencing future retail investment. He is more optimistic about 2010 but says that access to funding will continue to be more limited as retail property developers now have to clear a higher bar.
“But the really good schemes that attract good quality tenants won’t be in this position. People who can afford to take a longer term view and have access to alternative funding will be in a better position,” he believes.
