With the retail market finally showing signs of stability in sales and rents after years of steep declines due to the crash, the big story in the sector in 2013 was the arrival of major international fashion retailers taking prime pitches on Dublin’s top thoroughfares.

Chief among these was the decision by the world's biggest clothing group, Spain's Inditex, to open a Massimo Dutti store in the former HMV outlet on Dublin's Grafton Street.

The group is to spend about €3 million fitting out the shop, which has about 1,254sq m (13,500sq ft) of retail space. To secure the tenant on a 10-year lease, the store owners had to drop the rent from €1.7 million to €865,000.

“Massimo Dutti is arguably the most significant and important letting on Grafton Street for years,” said one retail agent.

In June, the world's second- largest fashion retailer, H&M, agreed to open a large store in the former National Irish Bank on College Green. It will be paying about €800,000 for 1,858sq m (20,000sq ft) of space, with the store expected to open in summer 2014.

The outlet will be two doors away from the flagship Abercrombie & Fitch store, which is trading strongly in another landmark building once occupied by Bank of Ireland.

Swedish-based H&M also agreed to open its first Irish outlet for the upmarket Cos fashion brand in the premises occupied by Tower Records on Wicklow Street. It is unlikely to pay less than €500,000 per annum for 743sq m (8,000sq ft) of retail space.

It was the same story across the Liffey. Just last month, Spanish fast-fashion chain Mango agreed a rent of about €700,000 for one of the best pitches on Henry Street, while TK Maxx agreed to in effect become an anchor tenant at the Ilac Centre with a store of 33,000sq ft.

To secure the tenant, the landlords agreed to a two-year rent-free period before a €550,000 rent kicks in.

Fall in rents
Zone A rents in the city centre, according to Colliers International head of retail Aiden McDonnell, are now €4,300 per sq m on Grafton Street, "down from market highs of €8,600 to €10,700 per sq m".

On Henry Street, he says they are €3,400 per sq m, down from highs of about €7,500 per sq m. In suburban centres, Zone A rents in Dundrum are about €4,000 per sq m; €2,300 per sq m in Liffey Valley (“down from market highs of €3,200 to €4,000 per sq m”); and €2,450 per sq m in Blanchardstown (“down from highs of €3,200 to €3,800 per sq m”).

But McDonnell is cautious about these figures: “Many rental deals are confidential and predate recent legislation to register lease details, so it can be quite difficult to be precise as tenant incentives, etc, need to be allowed for.”

"Prime retail rents stabilised over 2013 despite some contradictory evidence," says Stephen Murray, retail director at Jones Lang LaSalle. "Vacancy rates in prime locations also reduced."

During the first half of the year the vacancy rate on prime high streets such as Grafton Street and Henry Street were edging up to 4 per cent but as the year closes only two small units remain unoccupied on Grafton Street.

"Recent lettings to Pamela Scott and Parfois on Henry Street have driven the overall vacancy rate down for prime high street to 1 to 2 per cent," says James Quinlan, a director at agent Bannon.

“Dublin city retail rents outside the prime high streets range from €50 to €90 per sq ft based on a 1,000sq ft unit while suburban locations range from €30 to €55 per sq ft.”

Turnover from the sale of retail property investments, however, is expected to be surprisingly low in 2013. Excluding rumours about the imminent sale of Aviva’s interest in Liffey Valley Shopping Centre for about €252 million, year-end transactions could come in as low as €150 million.

As a result, retail values continued to slide. The Investment Property Databank reported that values on Grafton Street contracted by 4.3 per cent during the six months to the end of June, while “provincial retails found the going even tougher with a fall of 9.5 per cent”.

The only notable standalone retail investment transactions this year were River Island on Grafton Street for about €40 million and Avoca Handweavers on Suffolk Street for more than €7.3 million.

Provincial oversupply
While prime retail may be bottoming out in terms of rents and in some cases values, there is no debate about the oversupply of retail space in many provincial towns and cities, which no amount of abated rents or short-term temporary convenience lettings – so-called pop-up shops – can conceal.

“Some provincial towns have looked at the hard fact that many retail developments were overambitious for the size of their markets and, combined with a severe downturn in consumer spending, that several schemes were now unsustainable,” says McDonnell.

Looking to 2014, many retail agents expect the steady stream of retailers heading to the courts to seek relief from boomtime rents – either through receivership or examinership – to continue.

Others expect growth in internet shopping to chip away at store sales. Consequently, there will be further distress for some retailers with more names likely to join high-street casualties such as Barratts and Xtra-vision.

“But the ‘value’ retailers will continue to grow in terms of sales and expansion,” says one retail agent.

"Traders such as Penneys, TK Maxx, Boots, Zara, Aldi, Lidl, Holland & Barrett, Dealz and Tesco are all likely to continue expanding.

“There will also be further leading brands looking to enter the Irish retail market in select locations as the creation of a two-tier market between prime and secondary solidifies.”

Many in the sector expect a better 2014 as improvement in consumer confidence and growth in the numbers at work have yet to materialise in more sustained spending.