Euro's slide means more sales for Border retailers
Retail property in border towns such as Dundalk, Monaghan, Letterkenny and Sligo are attracting increased attention from expansionist minded retailers thanks in part to the fall in the value of the euro against sterling.
"Retailers who wouldn't have even considered locating in border towns two years ago are now willing to consider the option. We are very hopeful of attracting some international fashion chains to The Marshes shopping centre in Dundalk within the next few months," says Daniel McLaughlin of estate agents Bannon.
During the last three months the euro fell 7.4pc against sterling bringing to 12.4pc the fall over the last 15 months. Representing a significant price premium, this serves to deter thousands of southern shoppers from crossing the border as they had done in the late noughties.
For almost a century changes in currency, VAT and petrol prices have proven cyclical factors for cross border trade with loss of business from Sligo to Enniskillen, Letterkenny to Derry, Monaghan to Armagh and Dundalk to Newry.
A CBRE survey shows that Republic of Ireland car registrations in Northern Ireland shopping centre car parks had peaked at 68pc in 2008 and drifted down to 46pc by the end of 2013. They are believed to have fallen even more in the last three months.
Although the cycle has swung in favour of southern towns, not all of them have benefitted to the same extent. Donegal native McLaughlin says that Derry people are more inclined to come south to shop than are people in Banbridge or Newry so the Letterkenny retail market is benefitting more from the currency rate than is Dundalk.
Nevertheless the change has also helped the Co Louth capital. Footfall at The Marshes shopping centre is up about 6pc over the last 12 months and this is partly due to the recovery in the southern economy but also in the willingness of southern shoppers to shop local.
McLaughlin says occupancy at the Marshes has increased from 85pc in 2011 to 93pc at present and in recent months new tenants have moved in such as Carraig Donn, Starbucks and Vodafone.
"Two years ago international brands would have ignored border towns because of the double exposure with the currency risk exacerbating the economic factors such as employment. Now that has changed," McLaughlin adds.
The turnaround is also just beginning to benefit the traditional town centre shopping streets also. Keith Duffy of DNG Duffy says that vacancy rates are as high as 40pc in Dundalk's traditional retail precinct, Park and Clanbrassil streets, where other factors such as the small size of units as well as local authority rates influence demand from international and other retailers.
"Prices for shop properties are down about 70pc from the peak. Yields have stabilised at around 10pc and rents, which average around €10 per sq ft, have bottomed out," he says.
"Where it might have taken 12 months to let a shop now it may let within three months," he adds.
Letterkenny people have been proactive in addressing the downturn. Even though it lost out on the prize offered by Retail Excellence Ireland's national competition for town teams, Letterkenny's local businesses got together and set up their own town team whose task is to attract the right mix of businesses which will make the town's Main Street work for retailers and shoppers.
The team's commercial manager Dessie Larkin reports that vacancy levels on Main Street have fallen from 20pc to 8pc since last July. "The fall of the euro as well as the pick-up in the local economy have helped," he adds.
Another factor is the high occupancy levels in Letterkenny shopping centre and retail park. "Retailers wishing to locate in Letterkenny now have to consider the Main St. With its longer opening hours and absence of service charges, this can appeal more to local retailers," says Paul Doyle, managing director of Bannon.
Larkin's team provides assistance to prospective retailers and it encouraged Donegal business, Verve Fashion, to locate there. Four other local businesses have also located there including a hardware store, two cafés and a financial services firm which offers an insolvency service.
"We are talking to six others and hope that at least one of those, a farm store will open shortly," he says.
Rents are negotiable, depending on the premises and the owners, but they can range between €400 and €600 per premises per week.
"We are also working with the Save Church Lane Group which is planning to attract local arts and crafts people and together we are endeavouring to create a "Cathedral Quarter" in the area."
Meanwhile the town's tourist trade received a boost from the recent acquisition of three hotels, two by the McGettigan Group and a third by a Northern Ireland chain. The swing in favour of south border shopping centres also looks set to benefit property investors. The most notable of these is Kennedy Wilson which bought The Marshes last July for €44.5 million. Previously owned by Abbey Centre Ltd., the Marshes extends to 410,000 sq ft and comprises 39 retail units and a food court. Its prospectus said it was generating €3.85m a year in rent.
Last week Monaghan Retail Park, in Monaghan Town was sold by Allsop Space prior to auction to a private Irish investor. It was one of a portfolio of nine properties across the country sold for around a combined €11m. The auctioneer had been guiding about €1.6m for the Monaghan 10 unit property which extends to almost 110,000 sq ft and has only three tenants generating €186,347.56 in rent.
Two other border land retail centres were acquired by US investment firm Varde as part of its €140m deal to acquire the Spectrum portfolio of six countrywide centres. One of these, the Dundalk Retail Park, comprises 20 retail warehouse units totalling 223,276 sq ft,,a 15,000 sq ft industrial warehouse, a fast food restaurant and with 96pc occupancy is generating combined rents of almost €2.47m.
Spectrum also included 70pc of the Quayside Shopping Centre, Sligo, which has over 40 shops in a scheme which extends to 137,000 sq ft including office space. Varde's units have 90pc occupancy and their passing rent at the time of the deal was €1.29m. Tenants include TK Maxx, Next, and River Island.