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Retail rental market now close to collapse

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Dundrum Town Centre is one of the few shopping centres defying the gloom.

Dundrum Town Centre is one of the few shopping centres defying the gloom.

Dundrum Town Centre is one of the few shopping centres defying the gloom.

The Government's failure to sign into law new legislation banning upward-only rent review of commercial property is now "recklessly endangering thousands of retail jobs''.

The stark findings of a "strictly confidential report'' by Retail Excellence Ireland on the state of the Irish commercial property market reveals that the rental market for commercial property is in freefall.

The report claims the situation for retail outlets is now so bad that in 60 per cent of Ireland's major shopping centres landlords are voluntarily reducing rents by up to half.

When it comes to those shopping centres that are refusing to reduce their rents, an increasing volume of litigation is occurring between landlords and their desperate tenants.

However, retailers are now in so much trouble many landlords are agreeing to under- the-counter reductions.

The survey claims that landlords of certain centres are described as being "very pragmatic about the need to reduce rents by between 30 per cent to 50 per cent".

In Limerick's Castletroy Centre, for example, it has been claimed that landlords are offering 50 per cent reductions to tenants who continue to pay their rent arrears.

In other shopping centres there have been "no formal rent reductions, but many tenants have reduced rent payments and these have been accepted by the landlords''.

The situation is now so bad that even in retail centres which have unofficially reduced their rents, more than 30 per cent of the tenants are actively negotiating the termination of their leases

Labour Party TD Ciaran Lynch, who has tabled a Private Members Bill calling for an end to the current law on the topic, said that unless something was done jobs would be lost and some shopping centres could become derelict.

David Fitzsimons, CEO of Retail Excellence, said "there is a real and escalating crisis in the retail sector which is now at the frontline of Ireland's economic catastrophe''.

The survey provides the first national picture of the utter state of despair within the retail industry.

Across the 58 shopping centres that were covered the mood was only positive within one shopping centre in Waterford and the high-profile Dundrum Town Centre in affluent outh Dublin.

In central Dublin's stylish IFSC centre the number of shoppers is described as "non-existent'' whilst over in the Nutgrove Shopping Centre in Rathfarnham, in spite of claims that tenants have been offered 25 per cent discounts, tenants have claimed they are "at their wits' end'' and many suggest that "no level of rent reductions will justify continuing opening".

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Meanwhile, in the St Stephen's Green Centre, where no rent reductions have been offered, tenants are believed to be actively considering "a rent strike'' unless landlords get "their heads out of the sand''.

In the once-famous Tallaght Square in Dublin, where it is claimed "large parts of the scheme are boarded up'', the report says "the standard objective of most tenants is not to reduce rent but to get out ASAP''.

Even in Liffey Valley, which describes itself as being "recession-proof'', the survey says trading performances have "suffered further erosion''.

The situation as described in the survey is no better throughout the rest of the country.

Within Cork City traders now claim reductions of between 20 per cent and 25 per cent are "simply not enough'' and trading conditions have deteriorated so significantly only Nama can rescue some developments.

In Limerick, where "tenants are suffering intensively'', it has been claimed that reductions of 50 per cent are now common.

The situation is equally bad in Galway where traders claim the market has "vigorously declined'' while despairing shop owners in Tuam have said "abject conditions continue with matters getting worse every week".

This view is also common in Waterford while the impact of cross-border shopping in Louth has led to claims that "trading here can best be described as being woeful''.

Similar conditions throughout the country mean that in counties such as Meath, Westmeath, Clare and Sligo, in spite of rent reductions of between 25 per cent and 50 per cent, shopping centres are continuing to "shed tenants".

Speaking to the Sunday Independent Deputy Lynch said such a collapse in rents had "real implications for the credibility of the Government's Nama banking scheme''.

He noted that "one of the central planks of the valuation of the banks' property portfolio is that the commercial property market is still strong''.

However, he noted that these figures "give the lie to the minister's claim that prices are still holding''.

"Minister Lenihan has left himself desperately open to the fact that he is dangerously ignorant about the real state of the Irish property market.''

The minister said that "the most recent data has been factored into Nama''.

This claim was disputed, however, by David Fitzsimons of Retail Excellence.

He said that the current rents were "simply untenable'' and that "in effect, following on from the property bubble, a rent bubble now exists in the Irish market''.


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