In the 12 months to the third quarter of 2004, retail had a return of 14.9 per cent compared to -0.3 per cent in the office sector and 1.5 per cent in the industrial sector. Dick Ahlstrom reports

The retail sector was the shining star of the Irish property scene during 2004. Without its buoyancy the past year could have been a depressing affair with only moderate performance in other sectors.

In the 12 months to the third quarter of 2004, retail produced a return of 14.9 per cent compared to a decline of 0.3 per cent in the office sector and 1.5 per cent in the industrial sector.

A severe mismatch between supply and demand has fuelled this growth, and has also pushed up rents on the Republic's high streets and shopping centres, according to analysts at CB Richard Ellis Gunne.

Expansion is the name of the game given our current no-holds-barred rush to consumerism. The State's largest retail complexes are virtually all rebuilding to make themselves bigger. The resultant local traffic chaos is a nuisance but it makes for a strong end of year outcome on the property front.

The economic success of Ireland Inc has also encouraged many foreign chains, including department stores and eateries, to cash in on our ongoing spending spree. Supermarketeers Aldi and Lidl continue to expand with nearly 100 stores between them, fashion retailers H&M, Harvey Nichols and Zara are on the hunt for space and the US restaurant chain Bennigans plans to open 20 new outlets over the next five years.

Much of the growth comes from the fact that we are earning more and spending it with abandon. Retail sales grew by 5 per cent in the year to March 2004, according to figures from the Central Statistics Office. This in turn pushes overall economic GDP growth which is expected to reach 3.5 per cent.

Dublin's Grafton Street remains the most sought-after retail location in the State. Space there comes at a premium with Zone A rents of €7,200 per sq m (€669 per sq ft) per annum.

Henry Street comes a close second as the premier shopping street on Dublin's northside. While Grafton Street achieves footfall counts of 11,250 persons per hour, Henry Street reaches 11,000 during a busy Saturday.

Much of the retail talk during 2004 focused on two massive centres, Dundrum Town Centre which when opened next year will be one of Europe's largest, and the Mahon Centre in Cork.

Neither of these will begin producing till results until 2005 and have served to deflect attention away from new centres that actually opened during the past year.

There were few enough of them. In Dublin the Clare Hall Shopping Centre opened and the "Red Mall", the expansion at Blanchardstown Shopping Centre in west Dublin, also opened its doors.

Tullamore Retail Park opened during the year with Tesco and Atlantic Homecare as tenants while Blackpool Retail Park in Cork opened in November, just in time to benefit from the Christmas spending rush. Tenants in this 10,200 sq m (109,792 sq ft) development include Atlantic Homecare, Argos and Lifestyle.

The stories of the year, though, are Grafton Street in Dublin and the two retail giants, Dundrum and Mahon Point, states Fergus Keane, director at Hamilton Osborne King. Grafton Street's retail space ranks as the fifth most expensive in the world, he adds.

"On Grafton Street a few old friends are disappearing. Bewley's is the story on that street, but there are also new traders coming in." He includes Monsoon and River Island's expansion into the old Arnotts site as examples.

As ever, Henry Street is also a major player in the sector and it has benefited from newcomers, including fashion giant Zara, he says. Zara has 600 shops worldwide but its opening in Henry Street this year easily claimed first place in the "total sales on opening day" rankings, coming in ahead of the previous best in Milan.

Dundrum is already a success given that its 88,250 sq m (949,914 sq ft) are already 100 per cent pre-let ahead of its opening next March, says Mr Keane. Mahon Point is also 100 per cent pre-let with its 23,250 sq m (250,261 sq ft) due to open to the public next February.

Both centres have an "exceptional line up", Mr Keane believes. The new centres have a number of international chains, including FCUK, Zara and Debenhams to name a few. "The past year has seen continued demand from the UK, European and international multiples," he states. "These guys want to pile into Ireland because their retail colleagues are very profitable here. I don't see that changing next year," he adds.

One driver for sustained retail growth next year will be the beginnings of the money avalanche coming out of the special savings incentive accounts (SSIAs).

This will pump an estimated €14 billion into the economy during 2005 and 2006, Mr Keane says.

Yet the growth seen over the past few years and 2004 in particular arises for another reason, he believes. "We are only catching up" in terms of retail space and demand, he says.

"It is a phenomenon, but it is a correction of having very limited supply. The consumers are demanding a product and we are in a leisure time culture with people devoting time to enjoying themselves and shopping."

His company has been involved with the O'Callaghan group at Mahon Point but the company is active across the board. He has brought Debenhams, Next and others to the Whitewater centre due to open in Newbridge, Co Kildare in the spring of 2006. He has also brought another H & M into the old Henry Street Eason's site at the ILAC centre in Dublin.

"I think the retail sector has been a great success," he concludes when considering performance during 2004.

Declan Stone, managing director at Colliers Jackson-Stops, takes a similarly positive view of the past year and also for 2005. His company has been "snowed under" by requests for locations in the new centres and redevelopments along Grafton and Henry streets in Dublin.

There has been "absolutely no let up in retail activity" through the year, he says. Demand has remained solid from the international retailers "seeking to capitalise on the propensity of the Irish consumer to spend". This has pushed rents across the board, with demand for quality space outpacing supply.

The refit at Roches Stores has transformed Henry Street, he believes. It has brought in Zara, Monsoon, Douglas, Springfield, Jane Norman and others.

Colliers Jackson-Stops has just acquired another site, 19 Henry Street, for Clinton Cards on behalf of Vision Express and is negotiating three other acquisitions "on behalf of big ticket retailers", he adds.

The company acted on behalf of retailers, including Virgin, Monsoon, River Island FCUK, Coast, Oasis and others, seeking space in the Dundrum centre.

It was also involved in the purchase of the Frascati Shopping Centre in Blackrock, Co Dublin, working for an investment client on the deal which exceeds €50 million.

Away from Dublin, he agrees the news is all Cork given the new Mahon Point centre.

"Cork city centre is also due to see some further retail development with proposals for the former Cork Examiner site in the city centre and renovation and extension of the Merchant's Quay centre," Mr Stone said.

He described Galway as having a "relatively quiet year" with no major new retail developments apart from the Welpark Retail Park on the city's outskirts.

The city's Shop Street, like Cork's Patrick Street and Dublin's Grafton Street, all struggle with the supply/demand problem. Too many retailers are chasing too little space.

Limerick has benefited from the extension of the Crescent Shopping Centre and a further extension is planned, he says. Waterford has also been "somewhat sedate this year due to lack of supply rather than lack of demand".

He details other bright spots as the Manor West retail scheme in Tralee, the Scotch Hall development in Drogheda (to be anchored by Dunnes Stores and Next), the Marshes Shopping Centre in Dundalk, a new scheme for Athlone Town Centre and the 23,250 sq m (250,260 sq ft) Arklow Town Centre, to name a few.