Creative thinking boosts provincial retail schemes
A combination of professional asset management techniques and a number of economic factors are helping provincial and suburban retail schemes to attract increased business and reduce their vacancy levels.
"It has also been helped by new entrepreneurs who are availing of property opportunities presented by the crisis to start their own businesses especially cottage industry outlets," says Aidan Grimes, executive director asset services at CBRE.
Some centres have even seen increased rents. He cites the example of Skerries Shopping Centre in North County Dublin, as one of 10 retail schemes around the country which he and his CBRE team are nursing back to health.
In 2011 half of the units in the 14 unit scheme were vacant and rents had also fallen by about 50pc.
Now that vacancy level has been reduced to two units and rents have also recovered slightly. Grimes is also actively marketing the centre to a range of businesses and targeting in particular restaurant chains, hair stylists and local doctors.
"Usually our first task when we take on a scheme is to stabilise the trade for the local business. The very fact that the landlord has brought us in and that they intend to invest in a marketing plan to attract business also helps to re-assure existing tenants," he says.
In the case of Skerries the landlord is Markland Holdings, an associate of the Ballymore Properties Group.
Grimes finds that it can also be vital to retain the anchor tenant which is usually a grocery supermarket. At Skerries this is Eurospar which had operated as a franchise store. However to ensure that the business was sustainable it was necessary to restructure the lease. As a result the BWG franchisor took over the tenancy from the franchisee and the terms of the lease were changed to include a turnover top-up element to the rent. In other words should the store's sales exceed a certain level then the tenant would pay extra rent. This provides an incentive for the landlord to maximise the footfall while also enabling him to recover the cost of marketing the centre.
CBRE's service also includes a review of the local market. This resulted in a re-branding. "The original name Skerries Point shopping centre meant little to local people and so to give locals a sense of ownership it was decided to call it Skerries Shopping Centre," he says.
Among the other measures to link with the community, they invested in a website. Then a big effort was made last Christmas by introducing Christmas lights and decorations for the first time and Santa Claus operated from a bus in its extensive car park.
"Now we are planning to re-launch the centre for Easter with a new marketing campaign to attract more customers and this will involve promotions on radio and a leaflet drop to homes in the catchment area which will highlight the new as well as the existing tenancies.
"While some of the new tenants have been there over a year, we needed to get a critical mass of traders before it would be worthwhile having a re-launch," Grimes explains.
The existing tenants also include a pharmacy, a fruit and vegetable shop and a Boylesports betting shop. CBRE secured four new tenants two of which complement the pharmacy: Vets First and Wellfit health and Leisure gym. The latter, a local operator, took half of the first floor where Kellys Bay Montessori school has also taken a portion of the space.
Mario's Takeaway has also moved into a ground floor unit. As a result the rents being quoted have risen. At the peak they would have been around €40 per sq ft and in 2011 they had fallen to €20 per sq ft. Now CBRE are quoting €25 to €30 per sq ft.
Since the crash, CBRE's intensive care team has taken on about 10 retail schemes around the country and as a result Mr Grimes has a very good handle as to how the pace of recovery varies in different towns around the country.
Some towns which have too much retail space are finding it difficult to recover. "We are still in the trenches. We are moving out of them but we are not fully out yet," he says.
Others escaped the worst of the crisis because developments that were planned didn't take place. "For instance if the Kilkenny Mart development had taken place then Kilkenny City would not be recovering as well as it has," he adds.
Then there are the border towns such as Letterkenny, Monaghan and Dundalk which are benefitting from the fall of the euro and this makes their shops more attractive for Sterling customers who travel from the north.
He also expects that shopping centres in commuter towns will benefit from the ripple out of the housing market from Dublin.
Recent surveys of housing prices and rents show that some of the commuter counties are playing catch up with Dublin as the shortage of both types of accommodation are pushing house hunters out of the capital and into towns where prices and rents are more affordable. This is trend is reflected in how demand has recently begun to push up prices more quickly in such counties than they have risen in Dublin.
For instance in the last quarter of 2014 when median asking prices for three bed semis rose 1.9pc in Dublin, similar houses rose by 10.4pc in Meath, 6.7pc in Kildare and 6pc in both Wicklow and Wexford.
These trends suggest that vacancy levels in commuter housing estates is on the decline and the increased numbers of families in those houses will also increase the footfall for the local shopping centres.
That is provided that such centres undertake marketing campaigns which will also encourage the 'blow-ins' to shop local.