High Street Retail Vacancy Rates Improve As Occupier Activity Strengthens
Occupiers on the move again as retail sales improve
Dublin, 18th November 2015 – Commercial property consultants CBRE today released their bi-annual report on the Irish retail sector which highlights 2015 as a year of recovery and growth for the sector. According to CBRE, the key indication of this return to growth is not only the improvements in retail sales and consumer confidence witnessed over the last 12 months, but more importantly,improved high street vacancy rates across many locations across the country. Indeed, of the ten locations surveyed as part of the study (which for the first time also included Waterford), seven of the regional locations surveyed recorded either stability or an improvement in vacancy rates in the last six months. The prime high street of Cork showed the most significant improvement over the period, as a number of pop-up or short term lettings saw the rate of vacancy reduce by 12.9% to stand at 6.6% by the end of Q3 2015. Belfast also continued to improve over the six months since Q1 2015 to stand at 6% at the end of Q3 with a number of transactions recently agreed in some of those vacant units.
CBRE notes that despite increased occupier activity, there was little change in the vacancy figures of some locations. Kilkenny’s High Street is an example where despite a number of tenant moves, the net effect on vacancy was only marginal with the overall vacancy rate having reduced in the six months from just 7.7% to 6.6% by the end of Q3 2015. Killarney’s vacancy rate once again improved over the last six months to stand at 2.0%, while the level of ground floor vacancy in Athlone and Limerick remained stable over the period as new additions were counteracted by new vacancies emerging.
Although there was a minimal increase of 1% in the ground floor vacancy rates on the high streets of Dublin, Galway and Sligo in the period, CBRE notes that negotiations are underway on vacant units in both Dublin and Galway which will change the situation in coming months. Indeed, both locations are expected to approach full occupancy in the near future.
What is most encouraging about the current retail environment is the diversity of occupier demand that is chasing prime units not just in the capital but in prime retail high streets across the country. We’re seeing demand coming not just from a large number of expanding indigenous occupiers but also new international entrants and the ever growing food and beverage sector. Occupiers are encouraged by the strength in retail sales and consumer confidence over the year and especially in more recent weeks as a result of the measures announced in Budget 2016. It should hopefully be a successful and busy end to the year for some deserving retailers who have come through a difficult few years.
One effect of an improvement in vacancy levels however, is a tightening in the supply of prime high street units across the country and the resultant upward pressure on prime Zone A rents. According to CBRE, prime Zone A retail rents on Dublin’s Grafton Street stand at €5,500 per square metre per annum in Q3 2015, while rents on Dublin’s Henry Street stand at €3,500 per square metre per annum and elsewhere have remained stable over the six months since Q1 2015. The property consultants in their report also note that over €455 million was invested in the retail sector in the first nine months of 2015, a level which does not wholly represent the real activity in the sector as it does not include the €1.85 billion that was invested in the Project Jewel loan sale or otherloan sale activity completed in the period. CBRE note that prime retail high street yields have contracted throughout 2015 to stand at a current level of 3.25% in comparison to 4.0% at the start of the year.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 165 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.