No signs of a slowdown in the retail boom

Retail MarketWith retail sales growing at around 6 per cent, the owners of virtually all of the major shopping centres in the Dublin area are planning to increase their space in the next few years by at least 464,515sq m (5 million sq ft), writes Rose Doyle

With the threatened economic slowdown likely to affect consumer spending, a new timescale may have to be devised for some of the vast and ambitious retail developments planned for many cities and towns as well as for the Dublin area.

Any pause in the building programme will inevitably lead to a renewed debate on whether many town centres are already over shopped.

Agents heavily involved in the retail area are insisting that all of the schemes will proceed - even if the search for high profile anchor tenants is getting tougher and the concessions necessary to land a deal are becoming more demanding.

"What's on line will be built," says Nigel Kingston, head of commercial development for Douglas Newman Good. Despite predicting a "slightly flat year ahead", Kingston says that the "big centres need to be added to retain retail positions, to keep up with market moves and developments".

Robert McNamara of Bannon Commercial puts it more cautiously, but says the same thing. "There's no overbuilding going on," he says. "There's such a long lead-in time to building that the economy will have gone through any current problems by the time second and third phases to shopping centres are up and going. Consumer strength is still okay in this country."

With retail sales continuing to grow at around 6 per cent, the owners of virtually all the major shopping centres in the Dublin area are planning to increase the overall volume of space over the next few years by at least 464,515sq m (5 million sq ft).

Jones Lang LaSalle estimates that more than 147,966sq m (almost 1.6 million sq ft) will come on stream in Dublin over the next two years. "Winners and losers will be determined by the scale of development that a particular anchor manages to attract.

"Smaller-scale retail developments will have to reposition themselves and offer a 'point-of-difference', such as surface free car-parking and leisure facilities."

The agency suggests that the volume of retail space due to come on stream throughout the country in 2008 is likely to result in key retailers being in a position to demand more concessionary terms.

Notwithstanding, they say that all the indicators are that retailer demand will remain strong in 2008.

All the main players are only too well aware that concessions are already a major factor in the market. Dublin agents cite the example of Liam Carroll at Glasshaus in Tallaght where he is reported to have given an exceptionally long rent-free period to Marks & Spencer to persuade them to anchor the development.

Nigel Kingston says that the nature of transactions has already changed. "Retailers are looking for slightly different deals now. In the last year anchor tenants, like the House of Fraser and Debenhams, as well as other, smaller traders, have been looking for packages which will give them between six months and two years rent-free plus a capital contribution to work on the fit-out, which can be terribly expensive."

Statistics for the year now ending show that shopping centre space in Ireland amounts to some 1.73 million sq m (18.622 million sq ft).

That figure is changing fast with the recent opening of Athlone Town Centre with 27,870sq m (300,000sq ft) and several others including Gorey, Arklow, Citywest, CHQ, Charlestown, Kilkenny and Laurence Town Centre in Drogheda. And that is only the start because three more centres are beingdeveloped in Limerick city; Waterford and Kilkenny are each to get a new shopping facility; and others are in the pipeline for Bray (two), Tullamore, Ballaghadereen, Ardee, Ballybofey, Navan, Ballinasloe, Buncrana, Thurles and Douglas.

But even these developments are small potatoes when compared to the grand plans for all the large shopping centres in Dublin, as well as for a number of other locations.

Joe O'Reilly's Chartered Land is in the happy position of having signed off on deals to bring both Marks & Spencer and the House of Fraser on board for the next phase of The Pavilions in Swords.

And if that is not enough, Tom and Michael Bailey of Bovale Developments are seeking planning permission for another 92,900sq m (1 million sq ft) of retail space on a 50-acre site opposite The Pavilions.

Coming a close second to this in size is the 69,675sq m (750,000sq ft) of retail space due to become part of the 140,000sq m (1.5 million sq ft) shopping and leisure complex planned for the former Carlton Cinema site between O'Connell Street and Moore Street in the centre of the capital.

Dundrum, the Northern Quarter (another city centre plan, this one backed by Arnotts and involving the revamping of an eight-acre north city centre site), Northside, The Square in Tallaght, Tallaght's Glasshaus, Blanchardstown, Adamstown, Liffey Valley, Donaghmede and Charlestown are all on line for expansion.

A Jones Lang LaSalle report has looked at Dublin's north city centre developments and concludes that Grafton Street is under threat from Henry Street because of the scarcity of stores with significant footprint as well as from "the substantial volume of retail accommodation due on stream in the north side of the city, following the redevelopment of Arnotts and Dublin Central."

Interesting times ahead.