Improvement seen in regional centres, but growth still slow
Shops in strong retail locations in the regional cities, major commuter towns and county capitals are attracting renewed interest from expanding Irish and international retail chains.
On the plus side for some landlords this spells rental increases but on the downside it means that some start up retailers are being forced to move out of good pitches despite the bravery they showed in taking spaces during the recession.
Some of the better performing centres with footfalls of 100,000 plus shopper per week have achieved rent increases 10 to 15pc bringing rents up to a range of €70 to €95 over the last 18 months ago. The better trading centres with footfalls of 80,000 and rental ranges of €30 to €50 per sq ft. have seen rent increases of up to 10pc.
However there are still some regional centres which have suffered from a loss of good anchors during the recession and where tenants are now expecting that new owners will move to recover footfall and trade.
Among the Irish chains that are in expansionary mode are Carrolls Gifts which, buoyed by the strong tourism growth, are looking to open in popular tourist towns such as Kilkenny, Killarney, Westport and Galway.
Irish fashion chain DV8 has opened 10 stores in the Republic bringing quality fashion brand names to county capitals that were by-passed by international fashion chains. As well as about 20 stores in Northern Ireland, DV8 has opened in Clonmel, Wexford, Roscommon, Tralee, Letterkenny and the two Dublin county council capitals of Tallaght and Swords.
Homestore & More is also expanding and recently opened in Newbridge, Co Kildare while Arts & Hobby opened its nineteenth store at Cruises St in Limerick.
As the combination of rising house prices and mortgage restrictions push home buyers into the wider commuter belt, among the centres to benefit is Marshes in Dundalk which Kennedy Wilson acquired last September. It recently saw the opening of Danish retailer, Tiger's first store on the East coast outside of Dublin and is about to see the opening of H&M's first fashion store outside of Dublin since 2011.
At the beginning of August, top of the range cosmetics brand Benefit will open a kiosk in Marshes.
A brand in the Louis Vuitton stable which already has a presence in Brown Thomas, Benefit will use Marshes to test the brand for the first time in a European shopping centre kiosk. It is also likely to add to the buzz in the Dundalk mall which, like Whitewater in Newbridge and Golden Island in Athlone, is generating footfall of around 80,000 a week.
CBRE and Bannon are the agents for Marshes and Bernadine Hogan of CBRE says that including lettings currently in the pipeline, she expects occupancy levels to increase from 75pc, when Kennedy Wilson bought it, to 94pc by September 2015. "I expect to achieve full occupancy in time for the Christmas season," she adds.
Trespass, the outdoor clothing and accessories chain has also opened in Marshes and in Killarney Outlet Centre.
With over 40 shops, including Dunnes, Penneys, River Island and New Look, rents at Marshes range between €35 and €55 per sq ft depending on location, size of store and covenant.
In contrast to three or four years ago when landlords were dependent on discount retailers to fill their vacant lots, now there are signs that luxury goods retailers and others with strong covenants are beginning to expand into the better regional pitches.
These luxury chains include jewellery retailer Pandora, which is looking to open stores in two or three regional locations. In addition the Irish franchise holder for Inglot cosmetics has recently opened a second Cork store, this one in Oliver Plunket St, and the franchisees are also looking at two or three other regional pitches.
Equivalenza, the global chain which manufactures perfumes and aromatic products and sells them through its own stores at keen prices, has already opened stores in Letterkenny and Donaghmede and is looking for outlets in Galway, Cork, Dundalk, and Limerick as well as Dublin City centre.
Commenting on the expansion by cosmetic chains, Bernadine Hogan says that unlike other retail sectors this is not the type of product that consumers buy over the internet.
"Some jewellery chains also supply independent retailers and they know from their wholesale order books that there is demand in the regions," she adds.
Stephen Murray of JLL says that other signs of the regional retail recovery are being seen in the lease terms.
"Whereas before landlords in good locations were willing to accept any reasonable retailer and offer incentives such as rent free periods, turnover rents or license terms of about a year, now they (landlords) are reducing or removing incentives as retail chains are competing for pitches and are willing to take 10 year leases with five year break clauses."
"In some cases this has meant that some retailers who got soft deals such as short leases and low rents during the recession, have had to move out," he adds.
Louise Donnelly, of DTZ Sherry FitzGerald says another change has seen leases move away from all inclusive deals which covered rates and service charges. "Now lease terms are exclusive of such costs," she adds.
She has noticed that services such as bakers and pharmacists continue to look for space. "Coffee shops such as Costa, Insomnia and Nespresso are also in expansionary mode as are Peacocks, the mini department store chain," Ms Donnelly says.