The continued recovery in employment is translating into a positive knock-on effect on the retail sector, a new report from property consultants, Savills Ireland claims. However, the association representing retailers says that talk of rents rising ""is at best premature".

Noting that there has been a shift in the structure of employment from part-time to full-time, Dr John McCartney, economist and director of research at Savills Ireland, said that this is feeding into consumer confidence and disposable incomes, and pushing up retail sales, which advanced by 8.6 per cent in July.

This, in turn, is leading to rental increaseas, says Larry Brennan, chairman and head of commercial division at Savills said.

“Improving sentiment and sales have seen demand for retail space rise significantly, with competitive bidding for prime properties becoming commonplace. This in turn has led to rental increases in prime locations. Currently, Zone A rental values are between € 4,000 and € 5,000 on Grafton Street and € 3,500 and € 4,000 on Henry Street”.

However, Mr Brennan said that this pick-up in activity has not yet been reflected outside of the main urban centres.

“However, as jobs growth and the housing market recovery diffuse from the main urban centres there will be a gradual improvement in regional markets.”

Responding to the report, Retail Excellence Ireland said that talk of retail rents starting to rise "is at best premature". Speaking this morning Seán Murphy, deputy CEO, said "while there is no doubt that activity levels and consumer sentiment are improving, this is on the back of a slump in the Irish economy that was only exceeded among OECD members by Iceland since the noughties."

Noting that “talk of rents actually increasing is hard to take or to believe”, Mr Murphy said that “there will always be certain transactions that are out of line with the broader rental market conditions, but these should not be used to extrapolate macro trends in the market.”

“Rents must be set at a level that is sustainable. Without rents that reflect market conditions, the potential to grow jobs in an industry that already employs almost 270,000 people in Ireland will be diminished.”