Strength and depth of occupiers to determine future of retail market

The events of 2020 have changed the way we live, work and play, as well as how we shop

If all recent reports and coverage were true, then ‘physical’ or ‘bricks-and-mortar’ retail is dead and the retail property market, by extension, is to be avoided at all costs.

It is important to remember that retail is not a homogenous one-size-fits-all market. Instead it is made up of a number of subsectors which have each been impacted in different ways, some positive, some negative. The three dominant institutional retail property asset classes making up fund weightings are high street, shopping centres and retail parks.

High street

The high street has been the most impacted retail sector, with Covid-19 decimating footfall and in-shop spend. It is worth noting that this sector was already challenged; however, Covid-19 accelerated the demise of a number of high-profile retail chains which may otherwise have survived longer. This has led to a spike in vacancy levels, with Dublin city centre particularly affected due to the paucity of office workers, tourists, students in addition to shoppers unwilling or unable to use limited public-transport services. The drop in rental value indices in 2020 has been driven by sentiment and as transactional evidence emerges we see this decline continuing into 2021. Two main things need to happen before a rental recovery occurs. Firstly the customer base has to return to the city centre. Secondly, the retail supply/occupier demand equation needs to balance out.

Shopping centres

Shopping centres face many of the same occupier issues as our high streets and the short-term rental outlook is similar. Our national shopping centre stock is of relatively modern construction, capable of easy adaptation through amalgamation, subdivision or change of use with the ability to readily respond to emerging market trends including those brought on by Covid. Their single ownership structures also help, and they are not faced with conservation issues and local planning policies that can be major and time-consuming hurdles to jump in high-street locations.


Retailer closures can often, in fact, provide opportunities to enhance and optimise a shopping centre’s tenant mix. A trend we expect to see continuing in 2021 is retailers continuing to embrace the omni-channel retail model which combines and integrates bricks-and-mortar and digital retailing. This will continue to see retailers upsizing in order to accommodate enhanced click-and-collect offerings, space which shopping centres can readily provide.

Unlike their US and UK counterparts, Irish shopping centres in the majority of cases have grocery-related anchors. As one of the few retail occupier classes to thrive during the pandemic, grocery retailers have sustained footfall levels in most of our shopping centres despite most other stores being closed.

Retail parks

While retail is undergoing a significant evolution, the retail park sector has remained extremely resilient and somewhat insulated from the move to online in recent years. While we believe concerns in relation to the online challenge are often overblown and overstated, it is also our view that retail parks are more defensive than the above two retail asset classes. This can be put down to a number of factors, including the nature of goods sold, accessible locations and convenient and ample parking provision.

The same factors have insulated the sector against the worst effects of Covid-19. Dublin retail park vacancy levels have decreased in 2020 and are now below 2 per cent with two notable recent lettings indicating positive rental growth. We have long held a positive market outlook for retail parks and recent events have just served to reinforce these views.


The impact of Covid-19 has brought about fundamental changes in how we live, work and play, and also to how we shop.

The pandemic has led to the prolonged closure of the majority of physical stores during 2020, forcing consumers to migrate online. It is too early to say if these changes are temporary or permanent. We suspect there will be elements of both, to varying degrees and across the different retail sub sectors.

The retail property market is like any other market with push/pull factors and market supply and demand being the ultimate determinant.

Importantly, we don’t have the oversupply issues existing in other jurisdictions such as the United States or UK, and the widely-held view is that our economic fundamentals (unlike the last recession) should ensure a much quicker return. Indeed, recent figures indicate Irish consumers are wealthier than ever and have used the pandemic to pay down debt and increase savings. This is likely to lead to a swift rebound in spending once the pandemic has passed and confidence returns.

It will be the strength and depth of the retail occupier market that will dictate the short- and medium-term future of the retail property market in Ireland. Right now retailers are dusting themselves down, trying to put 2020 behind them and it will be only be in 2021 that the majority begin to look forward again.

Eoin Feeney is deputy managing director and head of retail at BNP Paribas Real Estate Ireland