Property powerhouse and NAMA valuation panel member, CB Richard Ellis (CBRE) yesterday published its quarterly overview of the retail property sector in Ireland. It’s a funny old report as it mixes together some statistics on retail generally and elsewhere confines its reporting to shopping centres or indeed two streets. Whilst a little light on detail, it concludes that rent levels are still falling, though at a reduced pace and average retail rents in Ireland are now down 50% from peak levels in 2007. The note also claims that rent levels continue to come under pressure which suggests further declines in the short term at least.
The report confirms the challenging environment faced by retailers with retail sales excluding cars down 5% year-on-year (car sales benefited from a scrappage scheme which has distorted buying behaviour). Footfall on two ofDublin’s main shopping streets,Grafton StreetandHenry Streetis down 4-10% year on year, suggesting there are fewer customers. On a more positive note,Irelandhas attracted the presence of more global brands.
As regards capital values, the report cites the IPD property index which for retail premises indicates that prices are some 65% off peak levels. There was not one single retail investment transaction in Irelandin Q1, 2011 according to the report and although not stated, the inference is that sales transactions have tailed off across all retail sectors.
The reason? The challenging general economic conditions can’t be helping but the report identifies the proposed (or “threatened” or “committed to”, depending on which side of the debate you stand) abolition of Upward Only Rent Review (UORR) leases which may mean that commercial tenants see their rents falling to open market rents. UORR leases may have rent levels twice that of current open market rents. The Society of Chartered Surveyors in Ireland yesterday called for urgent clarification of intentions in respect of the issue from the justice minister, Alan Shatter.
Interestingly the report concludes that vacancy levels are more or less stable, with vacancy on the two survey Dublin Streets actually dropping considerably in the last 12 months. Because the report seemingly examines shopping centre and retail park vacancy, it is unclear if the “stable” claim applies across the board. Certainly many towns up and down the country seem to have no shortage of vacant premises, though these will not be in shopping centres.
And lastly, the report seems to adopt a curious position on the IMF/EU Memorandum of Understanding commitment for Q3, 2011 “the government will conduct a study on the economic impact of eliminating the cap on the size of retail premises with a view to enhancing competition and lowering prices for consumers and discuss implementation of its policy implications with the Commission services” (PDF page 79). CBRE say “in our opinion, eliminating the current cap would not necessarily enhance competition or lower prices for consumers” No evidence is offered in support of that opinion.
Since retailers are paying 50% less in costs when are the prices coming down in the shops?
- Ireland’s property market (Ronan lyons latest posting) (thepressnet.com)
- [Ronan Lyons] What the Friday Firesale tells us about Ireland’s property market (thepressnet.com)
- Shop insurance: Small and large retailers alike are “extremely cautious” (premierlinedirect.co.uk)
- No More Bailouts For Ireland, Though (huffingtonpost.com)
- More bad news for independent retailers – But we have the solution…. [Antony Welfare] (ecademy.com)