Monday 21 October 2019

Retail activity robust across Irish cities in face of Brexit

Dublin’s vacancy rate of 3.9pc is set to fall next month with the opening of Victoria’s Secret on Grafton Street
Dublin’s vacancy rate of 3.9pc is set to fall next month with the opening of Victoria’s Secret on Grafton Street
Donal Buckley

Donal Buckley

Occupier activity has largely been positive on the high streets of 10 Irish towns and cities around the country during the six months to the end of September according to CBRE's twice-yearly vacancy survey. As a result, four urban centres saw increases while none showed falls in occupancy levels.

Killarney fared best with its vacancy rate dropping from 6.8pc at the end of March to 1.9pc at the end of third quarter.

Galway maintained its status as the tightest market, with a vacancy rate of only 1.8pc boosted by strong footfall and considerable tourist activity. Furthermore, Athlone's high street continued to improve, coming in at 9.3pc in September compared to 12.4pc six months earlier.

Vacancy rates in Limerick (8.5 pc), Waterford (5.8 pc), Belfast (6.0 pc) and Kilkenny (4.3pc) remained relatively stable over the six-month period.

Cork's high street vacancy decreased slightly from 9.9pc to 9.1pc, as the Capitol site on Patrick Street was completed and fully let to Lifestyle Sports and Homesense over the summer.

Lifestyle Sports relocated from a smaller unit on the street, which has yet to be occupied. There are a number of units with smaller floor plates that remain vacant, however, there continues to be development activity along the Cork corridor, such as Davy's amalgamation of three units into one modern, fit-for-purpose building, which is expected to attract interest from national and international retailers that have requirements for larger floor plates. Nearby, Opera Lane is boasting full occupancy.

In Sligo the vacancy rate remains stubbornly high at around 20pc. However some new stores have opened in the last six months but other stores have been vacated and as a result the vacancy rate has remained relatively unchanged.

Meanwhile, high street vacancy in Dublin remains stable at 3.9pc, although this includes units such as Victoria's Secret on Grafton Street, which is now nearing completion and due to open next month, thereby reducing availability further.

Matthew Walaszek, senior research analyst at CBRE Ireland, notes that "The Luas Cross City project is scheduled for completion by the end of the year. There will be an additional 10 million passenger journeys per year on the newly extended Luas network, which will undoubtedly be beneficial for city centre retailers that have suffered considerable disruption during the construction phase".

After an 11pc increase in prime Zone A rents on Dublin's Grafton Street in the last quarter of 2016, they have stayed flat this year at €6,300 per square metre per annum (psmpa).

Meanwhile, on Dublin's Henry Street, prime Zone A rents increased by 13pc towards the end of last year and have remained steady at €4,500 psmpa at the end of Q3.

After a 13pc increase in Dundrum Town Centre Zone A rents, during the previous six months, these remained stable in the last six-month period at €4,500 psmpa.

Shopping centre rents across the country were also stable during the period of the latest survey at between €1,500 and €3,000 psmpa.

Bernadine Hogan, senior director in the retail agency department at CBRE Ireland said: "Demand remains strong for well-located neighbourhood schemes and shopping centres from service occupiers, food and beverage operators and beauty retailers. We continue to see international retailers seeking to secure stores in prime locations, while many indigenous occupiers are continuing to roll out expansion programmes across the country. Occupiers are attracted to the Dublin market given that prime rents are competitive compared to other European locations such as London or Paris".

The report also points to an uptick in retail investment since the beginning of the year with more than €130m invested in the sector in Q3, compared to €120m in Q1 and €71m in Q2. These included the sales of four shopping centres including Merchants Quay in Cork City, one in Wexford and the Oranmore Shopping Centre in Galway which sold for about €16.3m.

Retail transactions accounted for 24pc of the total volume of transactions in the first nine months of 2017, compared to 40pc for offices and 17pc for mixed-use. The largest retail investment transactions completed during Q3 2017 included the sale of 100-101 Grafton Street in Dublin for more than €50m,

In an analysis of Irish retail density, or gross retail lettable area per 1,000 of the population, the report shows that Dublin's retail density is 33pc higher than the national average.

Mr. Walaszek contends that "This is not surprising given that Dublin's population is over 28pc of the total Irish population. However, Dublin's surrounding counties of Kildare, Meath and Wicklow which boast high population numbers, have relatively low retail density by comparison. Kildare has 492 sq m per 1,000 capita and Meath 393 sq m per 1,000 capita. In contrast Cork has 591 sq m, Galway 580 sq m and Limerick as much as 1,004 sq m per 1,000 capita.

The report also says that during the six months Irish retail showed positive fundamentals driven by strong economic conditions and monthly footfall figures.

Retail sales volumes across all businesses rose by 0.7pc in August when car sales are excluded and 4.7pc year-on-year. This should be helped by Irish households experiencing an increase in disposable income in recent months with average weekly earnings rising by 2.2pc year-on-year.

However retail property transactions have been somewhat sluggish in 2017, mainly due to concerns over Brexit as retailers are reluctant to move premises or pursue expansion programmes until there is more clarity in relation to the terms of the UK's deal with the EU.

CBRE notes that although the pace of retail sales growth has eased in recent months, this may be a result of leakage to Northern Ireland, which is firmly linked to the relative weakness of Sterling.

In addition, the report also references the impact of e-commerce on retail sales, as the growth of online spending increased by 11.5pc year-on-year in August while face-to-face spending dropped by 2pc.

Indo Business

Also in Business