Irish Retail Sector Momentum Continues
Growth in wages leads to increased household spending, while occupier demand remains healthy despite some cautiousness over Brexit
Dublin, October 12, 2017- Commercial property specialists CBRE recently released their latest research report, focussing on trends in the retail sector of the Irish economy and property market. According to CBRE, during the last six-month period the Irish retail sector has continued to show positive fundamentals driven by strong economic conditions and monthly footfall figures. Retail sales volumes across all businesses up 0.7% in the month of August (when excluding motor trades) and 4.7% higher year-on-year. Irish households have experienced an increase in disposable income in recent months with average weekly earnings rising by 2.2% year-on-year. Transactional activity has been somewhat sluggish in 2017, mainly due to concerns over Brexit as retailers are reluctant to move premises or pursue expansion programmes until there is more clarity on UK’s deal with the EU. The report notes that although the pace of retail sales growth has eased in recent months, this may be a result of leakage to Northern Ireland, which is firmly linked to the relative weakness of the Sterling. In addition, the report also references the impact of e-commerce on retail sales, as the growth of online spending increased by 11.5% year-on-year in August while face-to-face spending dropped by -2.0%.
According to CBRE, occupier activity has largely been positive on many high streets around the country in the last six month period. Of the 10 locations surveyed as part of CBRE’s bi-annual high street vacancy study, four locations recorded an improvement in occupancy rates in the last six months. Worth noting is Killarney, which dropped nearly 5 percentage points down to 1.9% at the end of Q3. Galway maintained its status as the tightest market, with a vacancy rate of only 1.8%, boosted by strong footfall and considerable tourist activity. Vacancy rates in Limerick (8.5%), Waterford (5.8%), Belfast (6.0%) and Kilkenny (4.3%) remained relatively stable in the six-month period. Furthermore, Athlone’s high street continued to improve, coming in at 9.3% in Q3 2017 compared to 12.4% six months prior, which is to be commended.
Cork’s high street vacancy decreased slightly to 9.1%, as the Capitol site on Patrick Street was completed and fully let to Lifestyle Sports and Homesense in the last six-month period. Lifestyle Sports relocated from a smaller unit on the street, which has yet to be occupied. There are a number of units with smaller floor plates that remain vacant, however, there continues to be development activity along the corridor, such as Davy’s amalgamation of three units into one modern, fit-for-purpose building, which is expected to attract interest from national and international retailers that have requirements for larger floor plates. Nearby, Opera Lane is boasting full occupancy. The largest opportunity for improvement still exists in Sligo. Although some new stores have opened in the last six months’ other stores have been vacated and as a result the vacancy rate has remained relatively unchanged.
Meanwhile, high street vacancy in Dublin remains stable at 3.9%, although this includes units such as Victoria’s Secret on Grafton Street, which is now nearing completion and due to open next month, thereby reducing availability further. Matthew Walaszek, Senior Research Analyst at CBRE Ireland notes that “The Luas Cross City project is scheduled for completion by the end of the year. There will be an additional 10 million passenger journeys per year on the newly extended Luas network, which will undoubtedly be beneficial for city centre retailers that have suffered considerable disruption during the construction phase”.
Prime Zone A rents on Dublin’s Grafton Street have stayed flat since Q1 2017 at €6,300 per square metre per annum, however, they have increased by 11% year-on-year. Meanwhile, on Dublin’s Henry Street, prime Zone A rents are steady at €4,500 per square metre per annum at the end of Q3 (+13% year-on-year). Zone A rents in Dundrum Town Centre as well as shopping centre rents across the country have remained stable in the last six-month period at €4,500 (+13% year-on-year), and between €1,500 and €3,000 per square metre per annum, respectively.
Demand remains strong for well-located neighbourhood schemes and shopping centres from service occupiers, food and beverage operators and beauty retailers. We continue to see international retailers seeking to secure stores in prime locations, while many indigenous occupiers are continuing to roll out expansion programmes across the country. Occupiers are attracted to the Dublin market given that prime rents are competitive compared to other European locations such as London or Paris.
The agents also summarise the sector’s investment activity within the report, where it is noted that There has been an uptick in retail investment since the beginning of the year with more than €130 million invested in the sector in Q3, compared to €120 million in Q1 and €71 million in Q2. Retail transactions accounted for 24% of the total volume of transactions in the first nine months of 2017, compared to 40% for offices and 17% for mixed-use. The largest retail investment transactions completed during Q3 2017 included the sale of 100-101 Grafton Street in Dublin for more than €50 million and the sale of Oranmore Shopping Centre in Galway for approximately €16.3 million.
Within the report, CBRE also included an analysis on Irish Retail density study, showing that Dublin’s retail density is 33% higher than the national average. Mr. Walaszek contends that “This is not surprising given that Dublin’s population is over 28% of the total Irish population. However, Dublin’s surrounding counties of Kildare, Meath and Wicklow which boast high population numbers, have relatively low retail density by comparison. This analysis may prove useful to developers considering retail projects in the future as well as supply valuable information to occupiers and investors considering different locations”.
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
CBRE U.C., (CBRE Ireland) registered in Ireland, no. 316570. PSRA Licence No. 001528 is the country’s largest commercial real estate services company with offices in Dublin and Cork. Currently employing over 135 employees, we work with occupiers, investors and developers of office, industrial and logistic, retail, hotel and healthcare property, providing strategic advice and execution for property sales and leasing; tenant representation, corporate services; property and project management; appraisal and valuation; development services; investment management and debt advisory; business rates and compulsory purchase and research and consulting. Please visit our website at www.cbre.ie