Retail market showing signs of growth as sales start to move up quickly once again
The poor summer weather along with the recovery in employment has helped to boost Irish retail sales which rose by 9.9pc in the year to July 2015. Furthermore with a giveaway Budget promised next month both Irish and international retail chains are looking to expand their Irish operations.
Consequently Dublin's super prime shopping centres as well as Grafton and Wicklow streets are at or close to full occupancy levels.
Eoin Feeney of BNP Paribas Real Estate says there is also a shortage of stores to rent in prime areas including Galway city centre and Patrick St in Cork.
"When units become vacant there is competitive bidding. Already we have seen key money paid in Wicklow St and I believe that the future may see key money paid to acquire leases in Grafton St," Feeney adds.
In the latter case he says that Grafton stores which generated rents of around €275,000 a year in 2014 are now achieving about €325,000 to €335,000 which indicates a rent rise of 15 to 20pc.
However Declan Stone of Colliers says that outside of the prime areas, rents are still only bottoming out after falls of between 60 to 75pc from the peak of the market.
"While retail sales volumes have increased strongly, the growth in the value of sales has been slower as competition between retailers has resulted in downward pressure on margins.
"Consumers are still cautious as Irish households continue to focus on paying down debt," he adds.
On the other hand Bannons recorded a 7.5pc growth during the first half of the year in retailers' sales among the portfolio of retail properties that it manages though footfall increased by only 2.9pc.
This growth was across a portfolio which included provincial centres some of which, such as Whitewater in Newbridge and Athlone Town Centre in Westmeath, performed particularly well.
This recovery should help NAMA to achieve the €115m price target being set for three provincial retail investments brought to the market this week in what is known as the Hazel Portfolio.
The portfolio comprises Wilton Shopping Centre in Cork; Drogheda Retail Park, Co Louth and Gateway Retail Park in Galway and is being marketed with a guide price of around €115m. It is likely to sell to an overseas investor. Minnesota-based Varde bought the Acorn Portfolio of four regional shopping centres last year for more than €30m above the asking price.
Reflecting the provincial locations, joint agents Bannon and DTZ Sherry FitzGerald are guiding a yield of around 7.4pc.
Dublin yields are lower as reflected in the 5.1pc achieved earlier this year when US investor, Invesco purchased the Frascatti Shopping centre in Blackrock, for more than €69m in a deal brokered by Colliers.
Marie Hunt of CBRE estimates that retail yields range from 3.5pc for prime high street up to 4.5pc for super prime shopping centres and 5.25pc for both prime shopping centres and prime retail park space.
But while yields have reflected strong investor interest, unlike the office market where both rents and yields performed strongly, the retail market has not followed the same pattern. "Rents generally have not increased," says Declan Stone.
But investor pricing is based on increasing employment and economic recovery helping to generate future rental growth.
CBRE's latest bi-monthly reports that prime headline zone A rents per sq m range from €5,500 per sq m in Grafton St; €4,000 in Dundrum; €3,500 in Henry St; €2,500 in Blanchardstown SC; €2,250 in Liffey Valley; €1,500 in The Square, Tallaght and €1,000 in secondary Dublin City Centre locations.
It also reckons that prime Dublin retail warehouses can achieve rents of €296 per sq m, secondary Dublin retail warehouse €135 per sq m and prime provincial retail warehouse €100 per sq m.
Among the Irish retail chains in expansionary mode are Art & Hobby which has opened new stores in Cruises Street, Limerick and in Blanchardstown while Insomnia is one of the coffee chains also seeking new locations.
New international chains have also come into the market such as cosmetic retailer Space NK in Grafton St.
Among the chains already here which are continuing to expand are: UK fashion chain Quiz which is hoping for a possible five stores; TK Maxx is taking units of between 25,000 and 35,000 sq ft with rents based on 5pc of turnover. It has just opened its latest stores in Mullingar and plans to open stores in Athlone and Killarney in the coming weeks as well as one in Douglas Village, Cork in the new year.
Also negotiating turnover rents for stores of around 4,000 to 20,000 sq ft, is the Inditex chain which includes such brands as Zara, Pull & Bear, Massimo Dutti, Bershka and Stradivarius.
In the provinces, Gucci plan to open their first stand alone Irish store at Kildare Village Outlet Centre; Marshes Shopping Centre in Dundalk has signed up Tiger and H&M; Skechers has opened a new store at Whitewater Shopping Centre in Newbridge; Homestore & More have agreed to lease a new store at Axis Retail Park in Longford.
In the Mid west Vodafone has commenced trading at the Skycourt Shopping Centre in Shannon Town while Toys R'Us have agreed to lease units at Parkway Retail Park in Limerick.
This follows their move into Westend Retail Park, Blanchardstown, Dublin 15, where The Brow Bar Lounge has also commenced trading in recent days.
Meanwhile Lucan Shopping Centre in west Dublin has attracted Starbucks, Mao@Home and Base Pizza.
CBRE reports that the National Roads Authority awarded three new service station contracts to the Topaz Group.
Claddagh Jewellers are fitting out a new store on Dublin's Nassau Street; Aeropostale are fitting out a new store at Liffey Valley Shopping Centre in west Dublin; Furniture retailer DFS have opened in the former Curry's unit at Carrickmines in Dublin 18.