Positive Economic Conditions Continuing To Support The Retail Sector

Figure 1: High Street Vacancy Rates Q1 2017 vs Q3 2016 (Click to enlarge)

Dublin, May 24th 2017 - Commercial property specialists CBRE today released their latest Retail Marketview report for Q1 2017 focussing on recent trends and transactions in the retail sector of the Irish commercial property market. The property consultants say that strong economic fundamentals and in particular continued job creation remain broadly supportive of the retail sector, which in turn is boosting demand for retail property.


Matthew Walaszek, Senior Research Analyst at CBRE Research
Despite a slight drop in retail sales at the end of Q1 2017, the Irish retail sector continues to perform well overall with strong monthly footfall figures being recorded and retail sales volumes across all businesses 3.2% higher year-on-year. Irish households have experienced an increase in disposable income in recent months with average weekly earnings rising by 0.6% year-on-year. Meanwhile, the rate of unemployment has fallen to 6.2%, down 120 basis points from the previous year, all of which is supportive of activity in the retail sector
Matthew Walaszek, Senior Research Analyst at CBRE Research

According to CBRE, given the strong jobs market, falling unemployment and an increase in the delivery of new housing, demand for household goods remains particularly strong. The sale of electrical goods has increased by a considerable 15.5% year-on-year; furniture and lighting has increased by 11.8%; household equipment by 11.1% and hardware, paints and glass by 7.8%. However, the pace of growth in retail sales has eased in recent months as consumers react to increased uncertainty surrounding Brexit and the devaluation of Sterling. The growth of e-commerce also poses a challenge for brick-and-mortar retailers, with online spending increasing by 18% in the year to the end of March 2017, while face-to-face spending declined by 2.5% in the period, according to the latest Visa Irish Consumer Spending Index.

The property consultants say that Prime Zone A rents on Dublin’s Grafton Street remain stable at €6,300 per square metre per annum - 37% below previous peak levels – but are expected to increase over the coming months as new transactional evidence materialises. Nearby on Dublin’s Henry Street, prime Zone A rents are steady at €4,500 per square metre per annum at present. Zone A rents in Dundrum Town Centre have increased since Q3 2016 to approximately €4,500 per square metre per annum. Meanwhile, prime shopping centre rents across the country have remained stable in recent months, typically ranging between €1,500 and €3,000 per square metre per annum, on average. Meanwhile, according to CBRE, prime retail warehouse rents have increased by 27% year-on-year to stand at approximately €377 per square metre per annum at present, while secondary and provincial retail warehouse rents have increased by 25% year-on-year and currently stand at between €129 and €169 per square metre per annum.

Robust occupier activity has positively impacted occupancy on many high streets around the country in the last six-month period. Mr Walaszek explained “Of the 10 locations surveyed as part of CBRE’s bi-annual high street vacancy study, five locations recorded an improvement in occupancy rates in the last six months, which is encouraging. Galway had the lowest high street vacancy rate at 1.83% with only two units currently vacant. Vacancy rates in Waterford and Belfast remained relatively stable in the six-month period. Athlone and Kilkenny recorded the biggest decrease in ground floor vacancy rates in the last six months, reducing by -2.3% and -1.2%, respectively. Limerick and Cork had slight increases in vacancy while Killarney and Sligo rose by 2.9% and 7.7%, respectively. Meanwhile, high street vacancy in Dublin ticked up slightly but still remains low at 3.87%, although this includes units such as Victoria’s Secret on Grafton Street which are currently being fitted out. Undoubtedly, though, the heavy construction activity in the city centre has been challenging for urban retailers over recent months”.

Having analysed recently released Census 2016 data, CBRE Research shows that on average there is now approximately 653 square metres of shopping centre and retail park accommodation per 1,000 head of population in Ireland, up from 644 square metres in 2016 and 629 square metres in 2012.

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Bernadine Hogan, CBRE Retail
Occupier activity has been somewhat sluggish in Q1 2017 compared to early 2016. Indeed, in the first quarter of 2017, there were 11 transactions signed in the five largest shopping centres in Dublin combined.  This is in line with a general decline in transaction volumes in recent years. However, the main reason for the decline in transaction volumes in the retail sector is a shortage of premises as opposed to a deterioration in occupier demand. While some UK retailers have put expansion plans on hold until after the UK election later this Summer, demand remains strong for well-located neighbourhood schemes and shopping centres from service occupiers, food and beverage operators and beauty. 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.
Bernadine Hogan, CBRE Retail

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., registered in Ireland, no. 316570. PSRA Licence No. 001528 is the country’s largest commercial real estate services company, now employing over 132 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.