IRISH RETAIL SECTOR CONTINUING TO FACE HUGE CHALLENGES
Property consultants CB Richard Ellis today released their latest report detailing trends in the Irish retail property sector for the first half of 2009. According to the Retail MarketView publication, the first six months of 2009 have been extremely difficult for the Irish retail sector. Consumer confidence has deteriorated sharply, particularly considering the rise in unemployment since the beginning of the year and this is hampering retail sales activity. Retail sales were down 8.2% in the year to March 2009 whilst the annual deterioration was 17.9% when motor sales are included. Interestingly, the deterioration in retail spending that has materialised in recent months has to date not been demonstrated in CB Richard Ellis’ pedestrian footfall counts on Dublin’s prime high streets, proving that consumers remain active although they are undoubtedly seeking out value and being more cautious generally.
CB Richard Ellis say that there has been a notable decline in retailer demand in recent months although some sectors of the market such as discount retailers continue to perform relatively well and continue with expansion plans. According to CB Richard Ellis, Ireland currently ranks in 20th place globally in terms of the number of international retailers who have a presence here. They expect this to increase over the coming years as globalisation increases and go on to say that some international retailers see this as an opportune time to expand into the Irish market considering the more attractive deals that can now be negotiated. They say that certain struggling retailers are negotiating with landlords to secure temporary rent discounts. Retail rents have generally been declining across Europe in the last six months and this is certainly been witnessed in the Irish market.
Following a decade of intensive development activity in the Irish retail market, the quantum of new shopping centre and retail park development due to come on stream across the country in 2009 and 2010 has been significantly curtailed, primarily as a result of a lack of finance to support development activity. Many retail schemes have been put on hold in the current climate, primarily as a result of a lack of funding to support development projects. In any event, developers are hesitant to proceed with new retail projects until such time as economic conditions show signs of improvement. CB Richard Ellis say that approximately 60,000 square metres of new shopping centre accommodation is coming on stream in 2009 while more than 35,000 square metres of new retail park accommodation will have been completed by year-end (including almost 31,000 sq m at IKEA). However, they say that it is difficult to estimate the quantum of new retail accommodation that will be completed in Ireland in 2010. While a lot of schemes were scheduled to come on stream in 2010, many of these projects are now on hold. However, there is more than 80,000 square metres of new shopping centre accommodation currently under construction that is scheduled for completion next year and more than 40,000 square metres of retail park development under construction that is scheduled to come on stream in 2010. There will as a result be a limited number of new retail opportunities coming to the market over the next number of years.
According to Cormac Kennedy, Director of Retail Agency at CB Richard Ellis, “No-one is denying that conditions in the Irish retail market are challenging at the moment. However, the reality is that while the retail sector has weakened relative to last year, there are still deals being completed, albeit on different terms and conditions than those completed at the peak of the market. Ultimately, the economy will improve and the retail sector will emerge stronger and more competitive as a result of the difficult trading conditions it is currently experiencing”.
Marie Hunt, Director of Research at CB Richard Ellis noted that in the investment market, the yield movement in the Irish retail market in the last 12 month period has been considerably more aggressive than that experienced in many other European markets, with prime retail yields in Ireland having increased from 2.5% to 6.5% since July 2008. However, she said that most of the value correction in this cycle has already taken place in the Irish market and weakening rental prospects have to a large extent already been factored in unlike some other European locations where yield movements are still occurring.
For Further Information please contact
Director – Retail Agency
CB Richard Ellis
Tel 00 353 1 6185583
Director - Research
CB Richard Ellis
Tel 00 353 1 6185543
About CB Richard Ellis
CB Richard Ellis 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 firm (in terms of 2008 revenue). The Company has more than 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 “best in class” company three years in a row and a Fortune 100 fastest growing company two years in a row. Please visit our website at www.cbre.com.
In Ireland, CB Richard Ellis is the country’s largest commercial real estate services company, now employing over 110 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, project management, consultancy, valuations and research. CB Richard Ellis Ireland has been listed among the top 50 Best Workplaces in Ireland, 2009, for the fifth year running. Please visit our website at www.cbre.ie