Demand returns
Published: 01 September, 2010
Signs are emerging that the long decline in the Irish retail market could at last have bottomed out.
Data from the Central Statistical Office has been registering a small increase in retail sales since the Spring, after two years of falling activity. And footfall on Dublin’s prime streets saw a 1.3 per cent increase in the second quarter of 2010, indicating that shoppers may once again be willing to venture out.
But are these positive signs making themselves felt in the property market? Not yet, according to CB Richard Ellis. In its latest retail bulletin, the firm’s director of research Marie Hunt warns that retail rents are still falling. “To date, prime zone A rental levels have declined by as much as 47.5 per cent from peak levels,” she notes, “and although the pace of decline has slowed considerably in recent months, downward pressures remain.”
And a report from Colliers International – recently rebranded from Colliers Jackson–Stopps – echoes this sentiment, pointing out that average retail rents are back to 1993 levels.
But Colliers’ head of retail Aiden McDonnell says that retailers are beginning to wake up to the fact that there are bargains to be had. “Now that the equation between rent and turnover is starting to look reasonable again, retailers such as New Look, Forever 21, Republic and quite a number of new entrants to the market are taking up space, because the deals are making sense,” he says.
And it’s not just new entrants that are looking to grow, according to McDonnell. “Value driven retailers such as Penneys, TK Maxx, Tesco, Lidl and Aldi together with young fashion retailers such as River Island, Next and New Look, continue to trade relatively well,” he says. And some are beginning to expand again.
McDonnell says Colliers has acquired a new store for TK Maxx at the Courtyard in Newbridge, next to the Whitewater Centre, and the retailer is also in negotiations for new stores in Waterford City and in Limerick. At the same time River Island is actively pursuing new stores in areas where it is not yet represented and upgrading a number of existing outlets to larger stores.
And McDonnell points to Holland & Barrett as an example of a retailer taking advantage of depressed rents and generous concessions to increase its presence in the Irish market. The health food specialist has opened eight new Irish stores over the past 12 months including sites in Ashbourne, Tralee, Thurles and the Omni Park shopping centre in Dublin.
The typical Holland & Barrett store extends to 150 sq m and McDonnell anticipates it will open more stores in key provincial locations in the coming months.
And Savills points to a recent letting on Henry Street as proof of improving retailer demand. Fat Face bid against three other multinational retailers to secure the lease on 197 sq m at 45 Henry Street, for its fourth Dublin branch. Fat Face eventually agreed to pay a rent of €350,000 pa.
The picture is also relatively buoyant on the opposite bank of the Liffey. Despite the tough economic climate just 2.8 per cent of retail space is vacant on the prime Grafton Street, according to Savills.
Larry Brennan, chairman and head of retail at Savills says: “A number of retailers are still keen to have a presence on one of the main shopping streets in Dublin, with the lack of larger stores being the only impediment for a number of the larger retailers. Rents on Grafton Street have adjusted considerably with rental levels currently in the region of €400 - €600, having peaked at €900 - €1,000 at the top of the market in 2006/2007.”
