According to CBRE, during the last six month period the Irish retail sector has continued to show signs of improvement and this improvement is now becoming increasingly evident in many locations around the country as well as Dublin. The report comments on the fact that the recovery is quite widespread with many sectors of retail experiencing a y-o-y improvement in both the volume and value of retail sales. The report also references the recently published Visa Consumer Index, which demonstrated strong growth in Irish Visa card transactions of 9.7% y-o-y.
According to CBRE, occupier demand and retailer activity has been getting consistently stronger in prime retail locations across Ireland over the last six months. This trend first materialised in Dublin but during the last year has become evident in other prime high streets and shopping centres around the country. Occupier demand is coming from both indigenous occupiers and new entrants to the market although CBRE admit that the number of retailers looking to expand in provincial locations is not as diverse as those focussing on securing stores in Dublin. According to CBRE, Dublin now ranks as the 78th most global city in the world (in terms of retailer presence) while Belfast ranks 116th in the world, with both cities having improved their ranking y-o-y.
The property consultants say that the biggest challenge facing many retailers is a lack of availability of retail units on prime high streets, shopping centres and retail schemes throughout the country. In turn, this has led to further increases in prime retail rents in key locations over recent months. According to CBRE, prime Zone A rents on Dublin’s Grafton Street (which first began to increase in 2015) have increased by 4% y-o-y to currently stand at €5,700/m²/year, while on Dublin’s Henry Street prime zone A rents increased for the first time since 2013 in Q1 2016, to stand at €4,000/m²/year – an annual increase of some 14.3%.
There has also been upward pressure on rental values in prime shopping centres across the country in the last six months with prime Zone A rents typically ranging between €1,500 and €3,000/m²/year on average. Meanwhile, Zone A rents in Dundrum Town Centre currently stand at approximately €4,000/m²/year according to CBRE. Prime retail warehouse rents remain stable at approximately €296/m²/year and between €100 and €135/m²/year for provincial and secondary locations.
Of the 10 high streets surveyed as part of CBRE’s bi-annual high street vacancy study, six locations recorded an improvement in occupancy in the last six months, the vacancy rate on one street remained stable (Killarney at 2%), while three high streets unfortunately recorded a further increase in vacancy levels over the period. The most significant reduction in ground floor vacancy rates over the last six months occurred in Limerick (where vacancy fell from 14% in Q3 2015 to 9.3% in Q1 2016); followed by Dublin’s prime retail streets where the combined vacancy rate of Grafton, Henry and Mary Street fell from 3.87% to 2.58% in the six month period.
High streets surveyed in Dublin, Killlarney and Galway are now approaching full occupancy with less than 3% vacancy rates recorded, with some streets in these locations such as both High Street and MainGuard street in Galway, New Street in Killarney and Mary Street in Dublin being fully occupied at the time of CBRE’s latest audit.
In contrast to these trends, unfortunately there are still some regional high streets that continue to struggle with high vacancy rates. In Q1 2016, Athlone in the Midlands had the highest vacancy rate of the ten locations surveyed, having experienced an increase of 4.6% in ground floor vacancy since Q3 2015 to stand at 18.2% at the end of the first quarter. Cork also experienced an increase in vacancy levels over the last six months from 6.6% in Q3 2015 to 9.5% in Q1 2016 – albeit occupancy on this street has improved compared to this time last year.
According to Bernadine Hogan, senior director in the retail agency department at CBRE, Ireland “There has been a lot of activity on many of the country’s high streets since our last high street vacancy audit was conducted in Q3 2015. In some locations, units have been amalgamated to create larger premises for potential occupiers. In other locations, a number of tenants have relocated to alternative premises on particular streets while there is clear evidence of efforts on behalf of some authorities and town councils to improve the retail landscape on streets in an effort to tackle vacancy and dereliction. It is encouraging to see improving occupancy on many of the high streets we surveyed, demonstrating the extent to which Ireland’s retail recovery is now starting to filter down to locations outside of the capital”.
It is not just occupiers that are active in the Irish retail property sector according to CBRE who say that investor interest in the retail sector has continued in the first half of 2016, with 35% of the total investment spend in Q1 2016 (€254m) comprising retail assets specifically.
