Pressure on retail rents as slew of brands seek space
This week's news of a 6.4pc growth in Irish retail sales volumes in the 12 months to January will provide further encouragement for international retail chains which are either considering entering the Irish market or expanding their Irish network. It also spells good news for a sector of the property market which has been lagging the office and hotels sectors.
Increased interest from international retail chains is reflected in how the local market has climbed up the rankings in recent research conducted by CBRE.
It shows that Ireland is now ranked as the twenty fifth most desirable location globally for retailers. That's a jump of nine places from last year's survey which showed Ireland at 34.
Simon Cooper of CBRE's Dublin retail department says that this increased interest is already reflected in the host of new international brands that have entered the Irish retail market over the last 36 months, many of these for the first time.
But the survey, known as How Active are Retailers Globally, also shows the potential to attract even more as only 9pc of the 150 international brands surveyed were targeting Ireland. Nevertheless that is quite a sizeable amount considering that only 25pc are targeting the US and 29pc the UK.
In separate local research, CBRE's Marie Hunt says that following the busiest Christmas trading period in several years, activity has remained consistently strong in the Irish retail property market during the first two months of the year.
"Demand for prime pitches throughout the country is strong although a lack of premises is proving to be a challenge being that many of the better high streets, shopping centres and retail schemes are now at, or close to, full occupancy.
The strength of demand from existing retailers and new entrants, which was clearly evident at last weeks' Completely Retail event in Dublin, is in turn fuelling rental growth and leading to the exchange of key money in certain locations," she adds.
However low availability of retail properties, "particularly on Grafton Street and Dundrum Town Centre is single headedly the biggest factor preventing and slowing down these retailers requirements," Simon Cooper adds.
A number of retail schemes are currently undergoing or planning refurbishment programmes and at Liffey Valley Shopping Centre in west Dublin is planning a 22,000 sq m extension according to the agency's bi-monthly report.
In Dublin men's fashion chain Magee are due to open a new store on South Anne Street while Dune have recently signed a lease on Grafton Street where both Lacoste and and Other Stories are currently undergoing fit-outs. Victoria Secret is also reported to be in negotiations on a possible lease on a Grafton Street store.
Among the other retail chains which are targeting Dublin are: ladies fashion retailers Jigsaw, Mint Velvet and Mango; Unisex retailers Hugo Boss, Cos, Vans, Levi's, Fly, Joules, Bugatti, Aeropostal, Calvin Klein and cosmetics chain Space NK.
"Every time that one of these brands enter the market it makes it slightly easier to attract the next as it allows us to create a compelling argument," Mr Cooper says.
There are also increasing signs of activity outside of Dublin. In recent weeks, it has been announced that, among other new moves: TK Maxx are currently fitting out new stores in Douglas Village in Cork and in the former Homebase store in Castlebar, Co. Mayo; Harvey Norman are reportedly looking to develop a new store at Ayrton Road in Tallaght to the west of the capital; Homestore & More is understood to have leased a new store in Portlaoise and are in negotiations on a number of other provincial stores. In addition, Iceland have recently announced plans to open 10 new stores.
Elsewhere, Centra has announced plans to open as many as 16 new stores this year while The Range has revealed a requirement for several new locations having recently agreed to open stores in Limerick, Cork and Dublin.
Meanwhile, Danish retailer Sostrene Grene, who are already in Dun Laoghaire, are in advanced negotiations to open five new stores in 2016.
"The strength of retailer appetite and potential for rental growth in this sector will no doubt be encouraging to the many investors who will be bidding on Blanchardstown Town Centre," Ms Hunt adds.
The Blanchardstown Centre is in the process of being sold by Green Property. Green is targeting a sale price of in the region of €1bn more than 20 years after it developed the west Dublin retail mecca.
The Grafton Street environs and Dundrum are in most cases the first port of call. Henry Street, Blanchardstown Shopping Centre and Liffey Valley would follow. Consequently rents in Grafton Street and Dundrum Town centre are the highest.
Prime Zone A retail rents on Grafton St have increased by 14pc to €5,700 per sq m over the last 12 months and about 50pc over the last 26 months. Over the 12 months to February Henry St rents have increased by 14.3pc to €4,000 per sq m.
Other factors in Grafton Street's favour have been the work of the city council in improving the paving and introducing a Scheme of Special Planning Control for Grafton St and its Environs.
This scheme makes it easier for high end fashion chains and jewellers to open on the street while making it more difficult, because of the need for planning permission for others such as mobile phone shops, souvenir shops, pharmacists, sex shops and hairdressers to open on the street.
Rents for Zone A properties are unchanged in other key shopping precincts over the 12 months to February: Dundrum €4,000 per sq m; Blanchardstown €2,500 per sq m; Liffey Valley €2,250 per sq m; The Square, Tallaght, €1,500 per sq m and secondary Dublin City Centre at €1,000 per sq m.
Research shows Grafton St rents are lower than 17 other major European cities and Mr Cooper points out that as a result of that retailers are "genuinely confident that they can enter the market and operate profitable and sustainable businesses."