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Market in Minutes | Ireland Retail
Savills World Research
Ireland Retail
2015 OUTLOOK
■ The ESRI is predicting that up to 50,000 new jobs will be added this year, followed by a further gain of 55,000 in 2016.
■ With new research emphasising the importance of jobs growth for retail property, this is expected to drive further growth in sales and,
hence, rents.
■ Retail rents are likely to rise most strongly in prime high street locations and the better suburban shopping centres.
■ We are now also seeing improved tenant demand in the stronger regional towns and shopping centres. This has led to a move from
turnover rents to base rents. Competitive bidding for good retail units in these locations should translate into rental growth going
forward.
■ The strengthening economy will support the continued improvement in sales for branded retailers which have performed very well
recently.
■ We are also likely to see new UK based retail park operators attracted to Ireland over the remainder of the year.
Ireland Retail Market in Minutes
June 2015
graph 1
Full-Time and Part-Time Employment Growth
6
5
4
3
% Chnage Y/Y
Ireland Retail & Research Teams
Please contact us for further information
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0
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[email protected]
[email protected]
[email protected]
[email protected]
Full-Time Employment
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
2013Q2
2013Q1
Darragh Cronin
Head, High Street & Shopping Centre Retail
+353 (0)1 618 1331
2012Q4
John McCartney
Director, Research
+353 (0)1 618 1427
2012Q3
David Potter
Director, Asset Management
+353 (0)1 618 1309
2012Q2
Larry Brennan
Head, Commercial Division
+353 (0)1 618 1302
2012Q1
-3
Part-Time Employment
Source: CSO
Economic Overview
Stephen McCarthy
Head, General Retail Agency
+353 (0)1 618 1349
[email protected]
David Eaton
Associate, Asset Management
+353 (0)1 618 1412
[email protected]
Gareth Shiells
Associate, Retail
+353 (0)1 618 1361
[email protected]
Tegan White
Senior Surveyor, Retail
+353 (0)1 618 1492
[email protected]
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04 Ireland Retail
Ireland outperformed every other EU
economy last year with GDP growth of
4.8%. This was the fastest rate of expansion
since 2007 and reflects the fact that both
net exports (10.4%) and domestic demand
(2.9%) simultaneously increased for the first
time since 2007.
This broadening and strengthening of the
growth base has contributed to ongoing
improvements in the labour market with
total employment increasing for the third
consecutive year in 2014. This recovery
strengthened further in Q1 with an annual
net increase of 41,300 jobs bringing
unemployment below 10% for the first time
since 2008. Within this there has been a
pronounced shift from part-time to full-time
employment; whereas overall employment
has risen by 2.2% in the last year, the number
of full-time jobs has grown by 3.6%.
Looking ahead, the effects of Quantitative
Easing (QE), which include low interest rates
and a favourable exchange rate, should
support further growth over the next two
years. In addition, pressures on the public
finances will continue to ease, providing
scope for tax cuts which will stimulate
demand. Overall, therefore, the economic
backdrop is set to remain favourable in
the medium term, with consensus growth
forecasts of 4.3% for this year and 3.8% for
2016. ■
Market in Minutes | Ireland Retail
■ Savills is also seeing a rise in offmarket transactions with Next’s reported
assignment to Hugo Boss being one
example.
■ Current Zone A headline rents on
Grafton Street are in the region of €5,600
– €5,900 per sq m. However, reflecting
13.2
Real Retail Sales
11.9
Live Register
-11.6
Real VAT Receipts
11.1
Grafton Street Footfall
7.5
Real GNP
5.2
Real GDP
4.8
Full Time Employment
3.6
Real Domestic Demand
2.9
Henry Street Footfall
2.9
Total Employment
2.2
Real Personal Consumption Expenditure
1.1
Real Average Gross Earnings
1.1
O’Connell Street Footfall
0.5
■ There have been relatively few new
store openings in the first quarter of
2015. In saying this, offers are being
made, and we expect more deals to
conclude in the coming months as
negotiations with new tenants run their
course.
■ Stradivarius, an Inditex brand, did
secure a new store in Mahon Point
Shopping Centre in Cork during Q1.
Savills acted for the landlord in this
letting. ■
Retail Parks
■ Over €200m was invested in retail
parks during 2014 with several of the
country’s largest assets being traded.
Notable examples include The Park
Carrickmines, Dundalk Retail Park, M1
Retail Park in Drogheda and Poppyfields
in Clonmel.
■ New ownership has led to increased
activity as incoming investors seek
to implement asset management
initiatives. This, in addition to a renewed
interest from many of the UK retail park
operators, should result in increased
demand through the remainder of 2015.
Sources: CSO, KBC Bank Ireland/ESRI, Dublin Town and Dept. of Finance
graph 2
Grafton St. Rental Growth
30
■ As with shopping centres, letting
activity in retail parks was slightly
subdued during Q1. However with
tenants such as DFS, one of the main
UK based furniture retailers, recently
opening its third Irish store at The Park
in Carrickmines, the omens are positive
for increased activity as the year
progresses. ■
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15
10
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-5
Food & Beverage (F&B)
-10
-15
-20
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-07
Dec-08
Dec-06
Dec-05
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Dec-03
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Dec-00
-25
Dec-99
■ No new lettings have been done on
the street since the Lifestyle Sports and
Claire’s Accessories transactions in Q4
2014. However the availability of the
former Karen Millen unit and the two
former O2 stores is set to change this.
Indeed, we understand that one of the
O2 units has already been agreed.
-14.2
Consumer Sentiment
Dec-97
■ Demand for space on Dublin’s Grafton
Street remains strong. However, with
very little availability rents are being
driven up. According to IPD, estimated
rental values in this location rose by
7.5% in the year to Q1 2015.
Percentage change (y/y)
Savings Ratio
Dec-98
Prime High Streets
Indicator
Dec-96
In addition, the research shows that
consumer sentiment and interest rates
also have a significant impact. Again,
with sentiment hovering around nine year
highs and QE keeping interest rates in
check, there is likely to be further upward
pressure on baseline retail rents.
We
expect rents to grow most strongly in
prime high street locations and in the
better shopping centres. Outside of
this it will be a mixed picture with some
schemes remaining under pressure,
particularly in more remote regional
locations. ■
Consumer Economy Dashboard
Dec-95
With the economic recovery now well
established almost every dial on the
consumer dashboard is pointing in a
positive direction – see Table 1. Most
notably retail sales are now growing at
their fastest rate since records began in
2005. While this is clearly positive, a new
study by researchers at Savills and the
ESRI has found that overall employment
growth is the single most important driver
of retail rents, with a 1% increase in jobs
growth leading to a 0.85% increase in
the IPD retail rents index five quarters
later.1 Given that the ESRI is currently
forecasting 50,000 additional jobs in
2015 and a further 55,000 next year,
this clearly augurs well for strengthening
growth in retail rents.
TABLE 1
% Change Y/Y
Retail Economy
Market in Minutes | Ireland Retail
Source: CSO
improved trading conditions and the strength
of demand we believe that they could reach
€6,450 per sq m by the end of this year.
■ Outside Dublin, Superdry has acquired a
new flagship store at 89-90 Patrick Street in
Cork. This letting comprised approximately
836 sq m over two levels and Savills acted as
agent to the landlord. ■
Shopping Centres
■ Prime shopping centres continue to trade well
with many reporting increased footfall and sales.
■ Reflecting this we are seeing a trend in which
some existing tenants are upsizing their footprints
to take advantage of improved trading conditions.
■ The Irish F&B market is showing
signs of improvement with many British
restaurant chains currently searching for
space in Dublin, Galway and Cork.
■ Development space is also in demand
with a strong line-up of new tenants
already agreed for the new restaurant
extension at Liffey Valley Shopping
Centre where
Savills advises the
landlord.
■ Strong demand for space, combined
with a scarcity of opportunities in Dublin
city centre, has led to the return of cash
premiums being offered to purchase
existing leases. ■
12 St. Stephen’s Green – Available to let through Savills
1. To read a summary of this research or to view video, please see http://www.savills.ie/research/what-explains-retail-rents-in-ireland-.aspx
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Ireland Retail
Ireland Retail
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