Tuesday 23 July 2019

Hammerson: Rising cost of living not hurting retail

Dundrum Town Centre, which is 99.9pc let, is Hammerson’s principal Irish retail asset. Photo: Frank Mc Grath
Dundrum Town Centre, which is 99.9pc let, is Hammerson’s principal Irish retail asset. Photo: Frank Mc Grath
Ronald Quinlan

Ronald Quinlan

The chief executive of the UK-headquartered shopping centre giant Hammerson has dismissed the suggestion that the record rents now being paid for housing in Dublin might have a negative impact on the performance of its Irish portfolio, even as shoppers find themselves with less and less disposable income.

Speaking to the Irish Independent following the release of Hammerson's half-year results yesterday, the company's ceo, David Atkins, said he remained "confident" over the medium term that the prospects for Ireland "remain on track" with the projections Hammerson had made when it acquired its interest in the Dundrum Town Centre and other Irish retail assets in October 2015.

Mr Atkins downplayed the potental significance of the spiralling cost of accommodation on consumers' spending power, saying: "Clearly as the economy grows, you can get imbalances coming through, particularly around real estate in the short term as demand can outstrip supply. That normally readjusts as developers start to build."

Mr Atkins pointed to Ireland's overall rate of economic growth, "positive consumer sentiment and healthy retail sales" as well as recent announcements by legal and financial services firms of their intentions to expand their Irish operations as supportive of the retail sector generally. He said: "Whether that's simply down to the skilled labour force or the desire to expand or adjust because of Brexit; the net result is more people and that brings prosperity to all."

Hammerson's director of retail in Ireland, Simon Betty, also downplayed the potential impact of rising residential rents on the retail sector, and more particularly Hammerson's tenants at Dundrum Town Centre, the Ilac Centre and the Pavilions in Swords.

He said: "There certainly seem to be a lot of headlines around the stresses in the Irish residential market, and around affordability metrics. To give some context across our portfolio in Dublin, we have something in the order of 50 million visitors per annum. While some of those may well be subject to increased rents and increased deposit requirements; at a fundamental level the Irish economy is doing very well, Dublin is doing very well, consumption is growing. Clearly a by-product of that is that the supply side of the residential market hasn't been delivering as quickly as demand has come through. At this stage, we don't necessarily see that increased rents in some of the isolated examples making the headlines being a downward force on the trading potential of our centres."

Mr Betty added: "As far as we're concerned, based on the conversations we're having with our retailers, consumers are spending well and retailers are very happy with their position in Dundrum."

Hammerson's latest results covering the six-month period to the end of June show that it generated net rental income of €17.4m from its Irish portfolio, which is comprised mainly of the Dundrum Town Centre, which it owns in a 50:50 joint venture with the German insurer Allianz, its 50pc share in the Ilac Centre and its share in the Pavilions shopping centre in Swords. The company's Irish reach is set to grow considerably in the coming years with the development of its holding in Dublin central.

While Hammerson's Irish rental income was largely derived in 2016 in the form of finance income from the property assets secured against the debt, on a pro-forma basis, it said its like-for-like net rental income growth would be 12pc for the first half of 2017. Underpinning that performance was the additional income arising from the settlement of rent reviews and new lettings undertaken, as well as additional non-rental revenues from car park and commercialisation activities at Dundrum Town Centre. In the first half of this year, Hammerson signed leases representing £1.5m of annual rental income, at 3pc above previous passing rents, and 5,700 sq m (61,354 sq ft) of space at the centre, which is 99.9pc let.

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