The demand for premium retail space will continue to buoy up the retail sector in 2002. Analysts will be looking at how consumer confidence holds up in the run up to Christmas but most predict that the demand for space will continue to outstrip supply, keeping rents strong. If there is a softening in the sector it will be in the secondary locations.
One change will be in the increase in the volume of activity according to Stephen Murray of Jones Lang La Salle. "I think that people who have in the past spurned approaches to sell their leases may now be prepared to do so." Agents are predicting that there could even be movement on Grafton Street, a street which has seen little or no activity over the past five years.
The secondary locations will, according to Murray, also see a reduction in key money with landlords who had what agents felt were high and unrealistic expectations having to take another look at their figures.
2002 will be the first year in a long time that there will be no major new shopping centres coming on stream. There were two this year, the Pavilions in Swords, Co Dublin and the extension to the Crescent shopping centre in Limerick. Both have let well and both are dominated by a mixture of Irish and international multiples. The next major retail opening will not be until 2004 when the Dundrum shopping centre is scheduled to open.
Several shopping centres are at the planning stages including a £50 million (€63.49m) scheme in Maynooth, Co. Kildare with 130,000 sq ft of retail space. Other centres are being redeveloped, with the ILAC centre in Dublin set for a major makeover due to British Land's investment in the north inner city shopping centre. Work is set to begin in January 2002.
There will be some activity at retail park level next year including the opening of a retail park in Dundalk with Atlantic Homecare as the main tenants. Several planning applications have been lodged, including one for a 150,000 sq ft retail park in Letterkenny, Co. Donegal. However last month's planning decision regarding Green Property's plans for the Blanchardstown Centre will have repercussions in the sector as a whole. An Bord Pleanalβ refused permission for a further six retail warehousing units with a total space of over 162,000 sq ft, citing what it called "an over-concentration of retail warehousing" in Blanchardstown and the danger that it would create serious traffic congestion.
"The fundamentals are still very strong for retail," says Larry Brennan, of Hamilton Osborne King. "We are in a low interest environment, low unemployment and have a young population, these factors point to a strong retail sector."
"There are a lot of retailers who have been frustrated over the years by the lack of available retail space in prime locations," says Fintan Tierney of Lambert Smyth Hampton. "These are for the most part still out there and still looking for space."
Demand for retail space has weakened among some sectors most notably mobile phone outlets which have been aggressive acquisitors for the past three years.
"This area of the market would appear to be near saturation but we are still seeing a strong demand countrywide for sites suitable for coffee shops so that sector is still strong," according to Fintan Tierney.
"The traditional provincial Dublin divide is weakening," says Tierney, "There is a strong demand particularly from Irish multiples for well-designed, well- located units in cities and large towns around the country." He cites Pamela Scott, Sasha and A Wear as high profile Irish brands which are in expansionist mode. New foreign entrants in the Irish retail scene which are actively seeking spaces include fashion brand Maxx which has opened in Galway and DIY superstore B&Q, which has bought into Liffey Valley.
"If there were more city centre shops of 2,000 sq ft or larger on the market, we would see other names such as H&M and The Gap snapping them up," says Eoin Feeney of Palmer McCormick, "That demand is very much there."
There's no sign of major tenancy failures," says Stephen Murray. "However there will certainly be cases where new retailers who had expectations based on the bumper year of 2000 will be looking to sell on."
"The new Dundrum shopping centre is three times oversubscribed," says Larry Brennan, "That would not be entirely unusual but what it does mean is that there is a wide choice of retailers to choose from which will ensure that we get the mix right." Tesco and House of Fraser are the anchor tenants in the development.
Describing the Dundrum centre as being on a par with Liffey Valley, he says that while smaller, less well-located malls might experience a fall-off in demand, this will not be the case for the premium centres.
"I know from selling Irish retail units to foreign retailers that the view is that while we might not be the cheapest location and that margins are squeezed here due to the high costs of labour, Ireland is still viewed positively," says Brennan. "Retailers have had it good for the past five or six years," says Larry Brennan of Hamilton Osborne King. "Some shake up is inevitable, but I don't seen any wholesale failures in the retail industry."
