Ripple effect of recovery lifts retail across country
The ripple effect of economic recovery is being seen with increased retailer occupancy levels on the main streets in major provincial towns and cities. However, increasing competition from online retailers as well as the weakness of sterling presents challenges for retailers to sustain this recovery.
According to the latest CBRE retail market report, vacancy rates have either reduced or stabilised in most towns and cities.
Athlone, Co. Westmeath, which has the worst vacancy levels, has seen them fall from a high of 21.6pc in 2014 to 18.2pc earlier in the year and 14.9pc in the latest quarter.
Cork's high street vacancy has more than halved from 19.5pc in the first quarter of 2015 to 8.1pc, and confidence in the city centre's future is reflected in John Cleary's €50m retail and office development on the Capitol site which fronts on to Grand Parade and is due for completion next summer.
Sligo's O'Connell Street has also improved and while still has the second highest vacancy rate in the country, it is down from 17.5pc in Q3 2014 to 15pc six months ago and 12.8pc in the third quarter of this year.
Limerick's O'Connell Street has seen vacancy levels fall from 9.3pc last spring to 7pc.
"A notable buzz has also returned to the high streets of Cork, Sligo and Waterford," says Bernadine Hogan, senior director at the CBRE's retail team, prior to her departure to the major MAPIC international retail conference in France on Tuesday, where she and her colleague Florence Stanley are hoping to drum up more international retailers for the Irish market.
Hogan will be on the CBRE stand at the Nice conference, where about 100 retailers from around the world will be on the lookout for new market places.
Other Irish estate agents will also attend MAPIC.
According to Hogan, during the six months to September Irish retail has continued to perform strongly and occupier activity has remained buoyant throughout the country's prime locations.
A combination of factors are benefiting the market, such as increased disposable income, reduced taxes in the recent Budget and higher employment. Consequently the volume of retail sales across all businesses were 3.4pc higher over the first nine months of 2016.
Sales of electrical goods increased 15.8pc, motor trades by 12pc, household equipment by 11.1pc and textiles, clothing and footwear by 8pc.
However, the pace of growth in retail sales was more volatile in the third quarter as consumers reacted to increased uncertainty, while consumer sentiment was at a 22-month low in October 2016.
Suzanne Barrett, director at CBRE's Ireland Research team, says the Brexit vote and devaluation of sterling has undoubtedly had an impact with evidence of leakage to online shopping and to Northern Ireland over recent months.
"Indeed, the latest Visa Irish Consumer Spending Index shows that online spending increased by 13.4pc in the year to end September - the fifth time in six months that online retailing experienced double-digit expansion."
In Dublin, meanwhile, where footfall levels remain consistently strong despite ongoing Luas works, CBRE notes that the combined high street vacancy rate of 2.58pc includes units that are reserved or close to fit-out, and all streets are in fact close to, if not at full occupancy.
"Indeed, this lack of availability on the capital's prime high streets has fuelled rental growth in recent months, with prime Zone A rents on Grafton Street increasing to €6,300 per square metre per annum - a 15pc annual increase - and prime Zone A rents on Henry Street increasing to €4,500 per square metre per annum, an annual increase of 29pc," adds Barrett.
Waterford also showed a good improvement in vacancy to 5.8pc, while levels stabilised in Kilkenny at 5.5pc and Galway at 2.8pc
In Kerry, Killarney's vacancy rate practically doubled in Q3. Nevertheless, it is still the third lowest in the country at 3.5pc.
Belfast saw a slight increase of 0.1pc as three units merged in to one and another came available.
In the shopping centre sector, primes rents remained stable while prime retail warehouse rents increased by 9pc year on year to stand at approximately €323 per sq m per annum.
Another reflection of the recovery has been how some of those retail parks that fared worst after the property crash have begun to attract occupiers.
Ms Hogan says: "We have seen a wide range of interest for retail accommodation throughout the country's prime locations, both from new international entrants looking to enter the market as well as indigenous and existing retailers looking to expand their operations. Retailers appear to be taking advantage of the momentum in regional high streets, with a lot of retailers moving pitch on the same street. What will be challenging going forward is finding the right space for occupiers in prime locations, with many high streets and prime shopping centres nearing full occupancy".
CBRE has also updated their Irish Retail density study, taking in to account new Census 2016 figures, which show that the average level of retail density in Ireland is approximately 643 sq m per 1,000 head of population.
Suzanne Barrett remarks on the divergence of retail density levels across the country.
"We can see that in areas with lower levels of population such as Louth, Carlow and Westmeath, the rate of retail development in the past has led to a density almost double the national average, while counties such as Dublin and Cork with higher levels of populations have considerably lower density levels by comparison. Similarly, outlying GDA counties such as Kildare, Meath and Wicklow which boast high population numbers, have relatively low retail density by comparison."
These densities do not take in to account drive-time catchments and, for instance, Louth and Westmeath shopping centres attract shoppers from neighbouring counties such as Meath and Longford.
Nonetheless, the study could help identify where there is potential capacity for further retail expansion.