Retail demand in Ireland finally breaks from the PIIGS – report
IRELAND'S retail market is no longer wallowing with the PIIGs, says the latest Europe- wide research from Jones Lang LaSalle and the Oxford Economics Study which shows Irish forecast retail growth for 2013 beating most of Europe.
At 1.5 per cent projected growth this year, Ireland is edging ahead of the UK at one per cent and a number of established EU markets such as Germany (0.9 per cent), France (0.2 per cent), and well ahead of falling PIIG markets such as Spain (-7.1 per cent), Portugal (-3.6 per cent), Italy (-2.6per cent) and Greece (-11.6 per cent). The big growth markets have emerged in the former east bloc headed by Russia (4.7 per cent).
JLL says the improvement is offering some Irish shopping centres, which have barely clung to survival, a window in which to consolidate and possibly survive.
"While the investor's Holy Grail of material retail rental growth is unlikely to emerge in the short term, the projected sales stabilisation does offer a little breathing space for shopping centres that have weathered the rough climate over recent years," says JLL retail director Stephen Murray, also the group's European director and author of Ireland's Shopping Centre Stock and Pipeline Development – Too Much, Too Little, Too Late?
"Such schemes with minimum vacancy and frequently greater lease flexibility through regears with tenants, now have the opportunity and a limited window to reposition themselves in order to compete on two fronts, with other schemes jostling for market share, and for on-line sales," says Mr Murray.
He says that the low level of retail growth is happening despite Ireland now having the third highest stock per capita of shopping centre space in Europe and almost three times the European average.
"As a result of significant levels of construction during the boom, Ireland has a high level of shopping centre stock for a country of its size and one of the highest levels in Europe. There are currently 500 sqm of gross floor area for every 1,000 inhabitants, ranking Ireland third out of 25 countries surveyed.
"We have almost three times the European average which is 185sqm", says Stephen Murray.
The bad news, he says, is that Ireland is finding itself lumbered with vast amounts of useless retail space where it's not needed, much like the "ghost estate" housing situation. Much of this space will inevitably have to be demolished.
"In a few years time we will be seeing "bolt on" development to centres like Liffey Valley in Dublin and people will be asking why it is needed when we have so much empty stock already. But the truth is that we have widespread constructed vacancy around the country which will never elicit any demand.
"In the years when free cash allowed Irish consumers to punch above their natural population weight we saw a lot of really big retail centres built in regional locations which were just not plausible in normal conditions. Planners didn't help by insisting on "mixed use" schemes so that a plausible box containing a number of shops ended up becoming a multi-storey centre with hotels, more shops and apartments surrounding it.
"The more challenging and interactable problem for the built environment is the catchment obsolescence on schemes that should never have been constructed.
Mr Murray says: "Ireland will have to face up to the fact that many of these spaces will just never be plausible – even with key anchor tenants and that it is inevitable that alternative uses will have to be found for them to save them from being demolished entirely."
He concludes that asset management will become increasingly important for landlords of shopping centres in order to survive the coming shake out.
"The asset manager's function in terms of determining appropriate centre scale, tenant mix and relevance in market position will be critical in the current extremely competitive phase."