Increased opportunities appearing for Dublin retail investment
Cash-rich domestic investors pursuing lot sizes up to €2m see retail investment as a solution to diversifying their portfolio.
Low deposit rates and equity market volatility are encouraging investors to return to traditional 'bricks and mortar' investments. Already familiar with one-off residential investments, these investors are now seeking commercial investments and view the retail sector as a good entry point.
This is due to the availability of smaller lot sizes, the attractive returns and the fact that private investors tend to feel greater comfort with retailers whom they can 'see and touch' every day rather than more remote office tenants.
So what type of retail investments are in vogue? Aside from the fundamental investment criteria such as location, covenant strength and lease length, investors are looking more to the profile of the tenant and to what type of retailers are thriving or are least sensitive to our environment.
Discount food retailers seem to be top of these investors' 'shopping lists', evident from the recent sales of the Tesco Express units in Rathmines and Crumlin. Similar tenant profiles are also in demand from foreign private investors who are buying larger lots such as the Aldi stores at Parnell Street and Sandyford.
Irish investors are also buying shops that are occupied by local retailers on the main street of suburban areas, particularly if the investor is familiar with the dynamics of the particular business or is from the local area. For example, we agreed the sale of a property in a north Dublin suburb towards the end of last year. Although multi-let, the dominant tenant was a restaurant user. Many of the enquiries were from investors familiar with the restaurant business, all of them domestic investors, many from the local area, and most were cash buyers.
We received several bids and the property is "sale agreed" close to the asking price.
We also recently brought a neat investment to the market in Blackrock let to a restaurant quoting €650,000 / 8.8pc net initial yield (NIY). We were inundated with enquiries, all from domestic investors.
Other properties new to the market include The Butcher Grill, 92 Ranelagh Village (quoting €675,000 / 8.13pc NIY); Boyle Sports, 98 Ranelagh Village (quoting €410,000 / 11.21pc NIY) and La Reserve Brasserie, 53 Ranelagh Village (quoting €425,000 /6.76pc NIY).
In addition, investors have a strong interest in Dublin city centre.
Cafe Boulevard on Baggot Street Lower, Subway on Nassau Street, Smiles on O'Connell Street and a local barber shop on Drury Street were all sale agreed / sold in 2012 close to or above their asking prices.
Activity also looks set to benefit from improved trading volumes across most retail sectors.
According to Retail Excellence Ireland, the Saturday before Christmas was the busiest day for retail in over five years and the Christmas period witnessed sale volumes in certain sectors reaching significant double-digit growth.
This year will be interesting and will hopefully bring about increased stability, which will in turn fuel further growth in this sector of the investment market.
Lisa McInerney is a senior negotiator with GVA Donal O Buachalla