Retail sector set for growth

Demand for retail space in the second quarter of 2014 was focused on prime high streets and shopping centres in Dublin

Recovery in full-time employment and strong economic growth are having a beneficial effect on the retail sector, according to the latest market research from Savills.

“Overall, 76,600 new jobs have been added in net terms since the low point in Q1 2012, but we are now seeing part- time jobs being converted to full-time employment as the recovery becomes more established. As a result, consumer confidence and disposable incomes are improving. This is feeding directly through to the tills, with retail sales up 8.6 per cent in July, the ninth consecutive month of growth,” said John McCartney, director of research at Savills Ireland.

“Jobs growth has driven consumer confidence to its highest level since January 2007 and we see this reflected in increased sales of larger, more expensive items such as cars and furniture. Car sales have risen by a third in the last year, while furniture sales are up 13.3 per cent in the year to July and have risen in each of the last 12 months,” he said.

Savills said the demand for retail space in the second quarter of 2014 was focused on prime high streets and shopping centres in Dublin and in the main regional cities. Competitive bidding for prime properties is “commonplace”. As a result, rents are starting to rise in prime locations. Zone A rental values are €4,000-€5,000 per square metre on Grafton Street and €3,500-€4,000 on Henry Street.

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Looking ahead, Savills expects rents to increase and incentive packages to tighten in prime areas. It says the gap between prime and secondary locations remains wide, with significant incentives required to attract tenants in weaker locations.

“The sale of shopping centres and retail parks is likely to continue this year and next as Nama continues to dispose of assets,” the report said. “Retailers with strong international brands are likely to perform better, particularly multinationals. Double-digit sales growth in these stores is likely in stronger shopping centres.”

Q2 2014 has seen a number of shopping centres and retail parks traded, including Project Acorn, which comprised three regional shopping centres. It was sold for €170 million – €40 million over the guide price. Meanwhile, the Parks Portfolio, encompassing five retail parks, is on the market with a guide price of €110 million. Both were through Nama and it is expected more will follow.

Savills also reports that the demand for restaurants and coffee shops remains strong, with the pubs market showing signs of improvement.

But, like general retail, demand tends to be focused on Dublin. Wetherspoons. for example, opened the Three Tun Tavern in Blackrock in July and they are in negotiations for several other sites.