A hold-up for €150m Liffey Valley extension might not be such a bad thing
Caveat: Nobody seems to have a clue what is in store for the retail sector so sitting tight could work
Liffey Valley Shopping Centre: it was to get about 22,000sq m (236,806sq m) extra net retail space, on top of its existing 37,000sq m. Photograph: Brenda Fitzsimons
The owners of the other major shopping centres around Dublin were, we hear, whooping and hollering over the decision last week by An Bórd Pleanála to reject a proposed €150 million extension of Liffey Valley in Clondalkin.
But given the “storm clouds” that lobby group Retail Ireland warns are gathering over the retail industry, might the board’s decision turn into a silver lining for Liffey Valley’s new owner if those storm clouds burst and drown the retail sector?
German pensions group BVK paid €630 million for Liffey Valley just two months ago. Local authority approval was already in place for the extension, including an Olympic-sized ice rink and 60 per cent more net retail space. Then An Bórd Pleanála intervened on Friday to nix it, citing traffic congestion. We don’t know exactly how they reacted at BVK, but “Scheisse!” seems like a fair shout.
Documents filed with the planning application show the centre was to get about 22,000sq m (236,806sq m) extra of net retail space, on top of Liffey Valley’s existing 37,000 sq m (398,264sq ft), which includes the new West End extension.
A 60 per cent retail expansion, in one go, is a big bet on any day of the week. With the current state of the Irish retail sector – a right curate’s egg due to the threat of Brexit on one hand and the opportunities from declining unemployment on the other – it was starting to look like a bit of a gamble.
If the seemingly inexorable slide towards a hard Brexit continues and another economic shock arrives, who knows what might happen to the Irish economy in coming years?
But what were the odds? Nobody, it seems, has a clue what lies in store for the retail sector in coming years. There are too many moving parts to make solid predictions. Here’s the blue sky version: consumer spending continues to rise, unemployment keeps falling, the economy will grow by at least 3 per cent annually in coming years and the good times, ladies and gents, return with bells on.
Excluding the Liffey Valley deal and a €1 billion transfer of control last July at Dundrum, investors splashed €1.5 billion on Irish retail assets in the first nine months of 2016, says CBRE. Investors clearly expect major growth.
Savills also last month predicted that retail rents will continue to rise and, notwithstanding the possibility of some short-term volatility, the fall in unemployment should see the sector right in the medium term. More jobs, more shoppers.
Now for the pessimistic version. Both main industry lobby groups – Ibec’s Retail Ireland and the independent body Retail Excellence Ireland – say the slowdown in retail growth over the second half of 2016 and the relatively weak Christmas experienced by their members are harbingers of a changed mood.
Nobody, it seems, has a clue what lies in store for the retail sector in coming years
Brexit flummoxed Irish consumers. Even if they’ve mostly shrugged off the shock by now, the decline in sterling means more of them are going north to shop for bargains. The rest have taken to the internet – a January survey from Visa showed that face-to-face retail sales were down 0.7 per cent in Ireland, although online sales were up more than 12 per cent. Web retailing is displacing some traditional retailing.
If the seemingly inexorable slide towards a hard Brexit continues and another economic shock arrives, perhaps in the form of another euro crisis precipitated by the election of Marine le Pen in France or Geert Wilders in the Netherlands, who knows what might happen to the Irish economy in coming years? And let’s not even mention the possible impact of Donald Trump.
The retail impact assessment filed last February to planners by Liffey Valley’s property manager, Hines, said a 2006 study showed the centre could easily support another 35,000sq m (376,736sq ft) of net retail space.
“Planning and retail policy at all levels supports the delivery of the [new] Liffey Valley floorspace,” it said.
And if Ireland, and the world, wings it in coming years and the sky doesn’t come crashing down, perhaps that will hold true.
What are Liffey Valley’s rivals doing? Hammerson, the new owners of Dundrum Town Centre, has already indicated it is having second thoughts about a huge retail extension to the centre that was presumed as nailed on for an adjoining six-acre site. Apartments, it now appears, are at the forefront of Hammerson’s mind, although a retail component could still form part of the scheme.
The Square in Tallaght is in a fight with Dunnes Stores, which wants to hold up its extension, while up at the Blanchardstown centre, Blackstone must be sweating over the hefty €950 million it paid for the centre last year. It also unlikely to rush into any major extension, despite there being enough adjacent land available to double the size of the centre.
There’s an old German proverb that says patience is a bitter plant, but it bears sweet fruit. Until the fog clears, perhaps Liffey Valley’s new owners would do well to take this An Bórd Pleanála-enforced breather to wait and see.