Property consultants CB Richard Ellis this week launched their latest property research report on the Irish retail property market, which concludes that conditions in the Irish retail sector continue to become more competitive, a point borne out by recent pedestrian footfall studies, which show a deterioration in shopper numbers on many of Ireland’s prime shopping streets, compared to this time last year.
However, this decline in footfall could, to some extent, be attributed to less favourable weather conditions compared to this time last year and the unusual timing of Easter holidays in 2008.
CB Richard Ellis suggest that many commentators are focussing on the balance between supply and demand in the retail sector considering the quantum of new retail accommodation that has come on stream in Ireland in the last number of years, particularly now that consumer spending is easing. If all the retail schemes being proposed around the country were to achieve planning permission and subsequently be developed, which CB Richard Ellis say is highly unlikely, oversupply would be inevitable and some locations in Ireland would be exposed. However, having undertaken considerable research on the development pipeline, the property consultant’s believe that the reality is that the pace of retail development activity in Ireland has eased considerably in the last two years and the potential for oversupply is, to a large extent, overstated. They say that developers now appear to be more cautious regarding shopping centre development and in any event, the scarcity of development finance in the current market is inhibiting further speculative development.
According to Marie Hunt, Director of Research at CB Richard Ellis, “There is no doubt but that concerns about rising unemployment, a stagnant housing market and less favourable economic conditions generally are starting to impact on consumer spending patterns in Ireland, with some retailers reporting tougher trading conditions in recent weeks. However, relative to other European economies, the Irish retail market continues to perform well regardless of wider economic concerns and occupier demand remains robust. Threats of potential oversupply while very real, have in our opinion, been overstated in recent months”.
According to the Irish Retail Market View publication for Q1 2008, the total quantum of shopping centre accommodation in Ireland will reach over 1.94 million m2 by year-end 2008 while the quantum of retail park accommodation will reach in the order of 1.25 million m2. A further 120,000m2 of new retail park accommodation is scheduled for completion in 2009 around the country while a further 250,000m2 of new shopping centre accommodation has an estimated completion date of 2009. 20% of all the shopping centre accommodation that is due to be developed over the next two years is located in Dublin while almost 50% of the retail park development due to be developed before the end of 2009 is located in Dublin, skewed to some extent by the 30,500m2 IKEA development which is due to open in the capital next year.
Cormac Kennedy, Director of Retail Agency at CB Richard Ellis is confident that demand for retail accommodation in the Irish market will remain strong, pointing to recent research carried out by CB Richard Ellis which shows that only 35% of international retailers are represented in the Irish market. He said that the process of globalisation of retail is still in its early stages and many more retailers will be establishing overseas operations over the next decade which suggests that there is great potential for more international retailers to establish operations in Ireland over the coming years. He added “While it is inevitable that retail spending in the Irish market will ease over the course of 2008, overseas retailers continue to enter the Irish market and existing retailers continue to look for expansion opportunities around the country, encouraged by demographics and economic conditions that are still favourable compared to the rest of Europe. Consumer spending in Ireland continues to compare very favourably with other European locations and is still higher than the EU average”.
Pedestrian counts carried out in Dublin in Q1 2008 showed that the number of shoppers on Grafton Street was down approximately 9% on the five-year average while the number of shoppers on Henry Street was down approximately 12% in Q1 2008 compared to the five-year average for the street.
According to CB Richard Ellis, the retail sector has not been immune to the international backdrop and prime yields have moved out in recent months, by approximately 25 basis points, with prime high street properties now yielding approximately 2.75% and prime shopping centres, which are the most prevalent retail form in the Irish market, yielding approximately 4% at present.
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Marie Hunt Director of Research CB Richard Ellis Tel + 353 1 6185543 Email - email@example.com Mobile - + 353 87 2727115