Retail: the good news is, there's growth

OPINION:Despite casualties, many retail chains are expanding

UNSURPRISINGLY, the retail property market performance in 2010 was no better than 2009 and was arguably appreciably worse. The combination of lower footfall in the streets and shopping malls, continued contraction in consumer spending, and weak consumer confidence, all conspired to keep the majority of retailers under pressure.

Casualties were inevitable, the highest profile of which were Waterstones Booksellers in Dublin, Celtic Bookmakers and four Toni Guy hair salons.

However, notwithstanding these difficult conditions, announcements started to emerge, particularly in late 2010/early 2011, of retailers either signing up or starting searches for new retail accommodation both in Dublin and around the country.

Easily the biggest name was Abercrombie Fitch (College Green) together with its sister company, Hollister (for Dundrum, later in 2011).

Other retailers expanding included TK Maxx, River Island, Holland Barrett and Cost Plus Sofas, while Danish retailer group Bestseller also announced plans to open a further 30 stores.

Moreover, the convenience sector was busy too, with activity from Tesco, Lidl, Aldi and Centra. The bargain retailers also got active with announcements from Pound Stretchers, Euro Savers and 99p Stores, together looking for more than 50 new stores between them in 2011.

Grafton Street activity (Abercrombie having announced their College Green flagship), saw the arrival of new retailers including Pandora Jewellery, Dalvey Accessories; the acquisition by John Brereton Jewellers of the former West Jewellery Shop and not least, the acquisition by Disney of the former Laura Ashley store.

Elsewhere in Dublin City Centre it is understood that Zizzi, the Italian sister of Milano Restaurant group, has secured the former Guess property on South Anne Street; the developers of Jervis Shopping Centre accepted a surrender of the Arnotts (formerly Debenhams) lease, having managed to pre-let all 11,613sq m (125,000sq ft) of it to a combination of Next, New Look and latest US arrival, Forever 21.

In spring this year, Colliers International analysed the 2010 retail transactions in which it had an involvement. Our research threw up some surprising statistics (see table).

Based on this evidence Colliers International’ conclusions were as follows:

1 Landlords expectations have adjusted significantly.

2 Rents have fallen and incentive packages increased.

3 Landlord and tenant interests have become significantly aligned. Landlords are prepared to accept turnover related deals in many cases.

4 Just over 50 per cent of the leases were either turnover only or turnover related, and by floor space less than 50 per cent of the entire portfolio was either on fixed or stepped rent leases.

5 Lease structures have changed; most leases are now sub 10 years (or longer with break options) and most leases incorporate a break option, often by the end of the fifth year. Interestingly retailers are not prepared yet to accede to such break options being mutual.

Despite poor trading conditions, a significant number of transactions still happened. The ones recorded here represent only Colliers International deals. The future outlook for the market is encouraging, with many retailers signalling significant intentions to expand, clearly using current market conditions as an opportunity to secure accommodation for the future on more competitive rental and lease terms.

Aside from the retail names mentioned earlier (the bulk of which are expected to expand further) Debenhams, Penneys and Tesco have been announced as anchors for a new shopping scheme in Sligo; Toys R Us are looking at the Dublin market for two large stores; Debenhams and Penneys are expected to announce further plans to expand together at a scheme in Carlow. Separately, Marks Spencer is known to have requirements at Limerick, Galway, Kilkenny, Carlow, Sligo, Tralee and Waterford, encompassing some 46,452sq m (500,000sq ft) of space.

Moreover, Colliers International acts for a number of UK and international (in-town and out-of-town) retailers, currently investigating expansion into the Irish market and we expect to make announcements during 2011. Colliers International has a major presence in all sectors of the market. Our concluding thought: perception is definitely worse than reality!

* Declan Stone is managing director of Colliers International