The primary issue, as David Fitzsimons, chief executive of Retail Excellence Ireland (formerly CREST) points out, is that consumer confidence is at an all-time low. The effect of the recession on high street sales has been unprecedented – in the first quarter of 2009 overall sales were down over 17 per cent on last year’s figures. And if current trends continue, the market is not likely to pick up any time soon, says Cormack Kennedy, director of CBRE’s retail division in Ireland. “As paypackets are reduced, spending will decline further,” he predicts.

Fergus Slattery, a consultant in the Irish commercial property arena, agrees that it is unclear how far the market will drop, yet says it will continue to decline into 2010. “The economy worldwide is continuing to deteriorate. Added to this, the denial period has been going on for about eight months and will be going on for another 12 months. I think at some stage in 2010 we’ll know where the bottom is.”

For Irish agents, times are invariably tough: Savills and CBRE are just two that have been hit by a recent wave of redundancies, with more expected to follow. Yet, there is a sense that there are still deals to be done, they’re just not on the same scale as in previous years. “Things are still very tough,” concedes Larry Brennan, director of Savills’ Dublin-based retail division. “That said, there is still demand from tenants, albeit that the deals we are doing are some way different to those we were doing in recent years.” It is a similar story for Peter Levins, associate director at Bannon. “I’m doing deals still – they’re just not the H&Ms and Zaras that they were last year. It’s smaller stuff,” he confides.

Inevitably, footfall is suffering too. Research by Retail Excellence Ireland shows that the estimated average footfall has decreased by almost
20 per cent. Yet, in contrast with falling footfall and occupancy levels, rents have continued to increase, says Fitzsimons. “Landlords are reluctant to reduce rent on the basis that they don’t want to in any way undermine the asset value of their property. Many are happy to let tenants close with a view to maintaining excessive rent levels.”

Both Fitzsimons and Slattery concur that costs have become over-inflated in Ireland. Firstly, rental values of commercial property on the Emerald Isle are incredibly expensive when compared to those of its European neighbours. “Our rent is running at over 20 per cent of turnover in most cases,” explains Fitzsimons. “The global rent average is about 5-8 per cent. No international retail brand worth their salt would ever invest more than 4.5-5 per cent in rent.”

According to Fitzsimons, there are a number of things that landlords and the government can do to resuscitate the floundering Irish economy. Firstly, he says, landlords must reduce rent. Secondly, the government should intervene and legislate to abolish all upward-only rent clauses. Thirdly, the minimum wage should be reduced – Ireland currently has the second highest minimum wage level in Europe. And lastly, Fitzsimons says the government needs to “intervene on all other excessive business costs”, including outgoings such as energy bills and supply costs.

There is also a requirement for heightened transparency around rent increases, suggests Fitzsimons. “What often happens is that a landlord increases the rent by up to 100 per cent, but then gives it back to tenants in the form of a side letter.” This falsely inflated rent is then imposed on tenants throughout the rest of the scheme with the intention of maintaining asset valuations. “All side agreements are hidden in letters which aren’t disclosed at the time of rent review,” he says. “There is a need for full disclosure. This would mean that the true and real rent level in the development will be filed, including rent free periods, contribution to capital fit-out and all other caveats. Unfortunately that doesn’t happen.”

Don Nugent, centre manager of Ireland’s best performing scheme, Dundrum, says it is not that easy for landlords to just reduce rents. “Some people have this vision in their head of the landlord sitting in their mansion having his afternoon served. The reality is very different,” he offers. “These are business people who have taken a risk and have invested heavily. So it’s not always that simple; it’s not always about reducing rent,” he argues.

For some, those risks haven’t paid off. Shopping centres are failing and some of the most likely victims are new schemes, especially those which are three years old and under. The statistics clearly reflect this: Retail Excellence Ireland’s most recent figures show the Beacon South Quarter in Sandyford, Dublin; MacDonagh Junction in Kilkenny; Athlone Town Centre and the Laurence Centre in Drogheda all ranked in the bottom 10 of performing centres, yet tenants are paying ‘unacceptable’ levels of rent.

Non-prime centres are also more likely to be feeling the pinch. “That’s prime in terms of location, prime in terms of tenant and anchor mix,” explains Dundrum’s Nugent. “It’s fair to say the centres that don’t have as strong an anchor mix have suffered.”

That said, the fundamental principles of retail development haven’t changed, says Nugent: “There are good centres and there are bad centres. The boom times in Ireland plastered over some of the cracks and now they’ve been highlighted in a downturn. It’s not rocket science,” he concludes.