Low rents and flexible leases fuelling demand for retail space
LOWER rents and flexible leases are attracting increased interest from local and overseas retailers and demand for prime retail opportunities increased significantly in Q1 of this year. These are among the conclusions of Lisney's retail report for Q1 2012.
However, it shows that the market remains challenging. Since the consumer spending peak in January 2008, the money taken in by retailers at the tills is down more than 28pc with the volume of stock sold down more than 22pc.
In the past year, the areas most affected are department stores (volume -5.6pc and value -4.5pc), clothing and textiles (volume -2.7pc and value -2.4pc), and furniture and lighting (volume -6.6pc and value -10.2pc).
Meanwhile, economic uncertainty across Europe and the lack of funding in Ireland continued to dampen confidence. "Cautious consumers and reduced spending caused further consolidation," adds Aoife Brennan, Lisney's research head.
Demand is strongest among overseas fashion, discount and restaurant operators who see the value available when seeking new leases. Outlets on both Grafton and Henry St have attracted offers.
Among the retailers seeking Grafton St outlets are Thomas Sabo, Banana Republic, and Sketchers. Nevertheless, Lisney's retail shutter count shows six units unoccupied and leases for occupied units are available for assignment or sub-let.
Henry Street arguably offers better value. This is reflected in rents which are, on average, 30pc cheaper and the larger floor sizes of its shops are preferred by international retailers.
These better trading conditions are also reflected in the full occupancy with only three shops available by way of assignment or sub-letting.
This contrasts with almost all other shopping precincts in the capital which have seen increased vacancies in Q1. Blanchardstown Shopping Centre, with 11 vacant units, is the highest of the top eight precincts surveyed and Liffey Valley is next with six. The Pavilions in Swords has the lowest vacancy rates with only one unit vacant.
Ms Brennan points out that leading suburban shopping centres continued to attract retailers in Q1.
Dundrum Town Centre secured beauty product retailer Keihls and jeweller Pandora which are paying annual rents of about €130,000 exclusive of service charge and rates for two 43sqm stores. Café du Lart took the former Chinese Buffet King unit, a 465sqm restaurant on a long lease at a reported rent of €200,000 pa.
Boots has taken a 2,050sqm store in Blanchardstown Town Centre on a long lease subject to a reported rent of €1.3m pa exclusive of rates and service charge. Also in the centre, Compu B has taken a new lease of the former 130sqm Monsoon store at a reported rent of €165,000 pa.
Out of town retail parks have also seen rising activity.
Retailers such as DFS, Homestore + More, Easy Living and Maxi Zoo are seeking opportunities, mainly in the greater Dublin area. Landlords have had to adopt a much more hands-on approach in terms of the asset management of these parks.
In Blanchardstown Retail Park, DFS has taken a new lease on the former Curry's unit. The accommodation, which extends to approximately 1,950sqm, was let on a long-term lease subject to a rent reportedly in excess of €400,000 pa.
Ms Brennan says the current level of retailer enquiries is encouraging. "We expect a further increase in the number of transactions over the coming months. This will be particularly the case in Dublin city centre. That said, we expect the market to remain challenging, principally for those seeking to dispose of pre- February 2010 leases."