Key money back in vogue

The recent pick-up in business on Dublin’s high streets has led to the reintroduction of key money for some leases coming on the market.

Such payments are particularly noticeable where retail units are under-rented or where there is planning permission to prepare food on the premises. In one such case, a food trader recently paid close to €200,000 for the lease of a city-centre building.

Savills is currently seeking €100,000 for the key of the Lacoste building, located along a busy stretch of Wicklow Street.

Darragh Cronin of Savills says that the shop is under-rented at €99,000 per annum and could probably be let for between €125,000 and €140,000.

Surprisingly, the German investor who owns the building did not push for a rent increase when the lease was recently reviewed. The 25-year lease dates from 2000 and so has about 10 years to run.

The ground floor has a retail area of 88sq m (947sq ft), while the basement extends to 85sq m (914sq ft). Dublin City Council is to charge €14,642 this year in rates on the two floors.

Lacoste going it alone

The planned closure of the Lacoste shop is apparently due to a decision by the French clothing and perfume specialist to withdraw its franchises and operate its own stores. Lacoste is reportedly looking for an alternative location on Grafton Street.

Cronin said that with the strengthening of demand from both fashion and food traders, rents in the Grafton Street area are undoubtedly on the rise, though still lagging behind peak levels.

“One phenomenon we are starting to see again is when an under-rented property in a high-profile location comes to the market, they are beginning to attract key money,” he said. “These payments are an acknowledgment of the quality of certain units, but also a perceived profit rent arising from the disparity between passing and current market levels.”

Key money was also being paid where there was a shortage of trading opportunities, Cronin said, or where a building with a large portion of the expensive kitchen infrastructure was already in place.