Snapping up a bargain
ShelfLife outlines the extent by which commercial property rents and sales prices have nosedived since their peak in 2007
Print14 June 2012
Bargains are available to be snapped up in the retail property sector. Or so ShelfLife often hears when we visit the retailers featuring in our store profile interviews. We’re often curious to know if the brave souls who are opening new shop doors for the first time feel any trepidation about setting up shop in the current shaky climate. At a time when, according to Musgrave chief executive Chris Martin: “The past three years have brought profound and permanent change to the grocery sector.”
However, regardless of whether nerves or excited anticipation are the order of the day, one thing we’re always assured of is that ‘a good deal’ was had in terms of property prices. With this in mind, we decided to take a snap shot of the types of figures you can expect to stump up to secure a prime retail opportunity across the country.
A stabilised situation
According to property consultants CBRE, Dublin high street rents have now stabilised at half of what they would have fetched at the peak of the market in 2007. The company’s latest review states “prime rents in the retail sector remained stable for the fourth consecutive quarter in Q1 2012 with prime ‘high street zone A’ rents of €5,000 per square metre prevailing in Dublin at the end of the quarter. This represents a 50% decline from the peak of the most recent cycle and is more than 30% below the 10 year average.”
What’s more, CBRE’s research shows our capital city has taken a significant leap in the affordability stakes. Whereas in 2007, Dublin ranked as the fourth most expensive retail location in Europe, it now comes in at a much lowlier position of 20th, based on prime rent per square metre. Aoife Brennan, chartered surveyor and head of research at Lisney, adds that “Shopping centres have performed better than high streets, with high streets having declined by between 46% and 59% compared to 29% for prime shopping centres.”
With rents and occupation costs (not including rates to the chagrin of many retailers) now considerably more affordable than they were a number of years ago, taken together with the fact that tenants can dictate the length and type of lease they are willing to sign, CBRE believes there is now “an encouraging level of transactional activity underway in the property sector”.
Reduced rents across the Republic
Elsewhere, rents and property values have taken an even deeper nosedive in other parts of the Republic. An analysis by the International Property Databank (IPD) shows retail property values in Cork city have slumped by over 68% from their peak in 2007. Again this is causing positive trends to emerge within the local commercial property sector.?Strong initial yields at low sales values now make Cork City an attractive option "to investors circling distressed, investment-grade assets," notes IPD research analyst Colm Lauder. This is a verdict also reached by Lisney’s latest market update report which states that “despite the difficult conditions, many retailers, both local and overseas, view the Irish market with enthusiasm as a result of the flexible leasing arrangements that can be obtained on attractive rental terms”.
A far cry from peak prices
Looking at the research, it’s undeniable that value now exists within the sector. That’s not to say that properties can be bought for petty change however. The sale of five adjoining shops at Castle Market in Dublin city centre shows that demand is still high, providing that the location and price are right. According to recent media reports, estate agent Savills logged more than 120 enquiries after seeking offers over €2.7 million for the parade of red-brick buildings in the fashionable Victorian shopping and dining enclave. The top bid made by a single investor awaiting the completion of legal procedures, was reported to “likely be in the region of €2.9 million". Not to be sniffed at certainly, but a far cry from the €12.5 million paid for the same properties in June 2007, by developer Bernard McNamara.
Another potent example of how prices have fallen is the Londis convenience store recently available on Quay Street, Dundalk, at a target price of €775,000. The store which was being offered for sale as a going concern by receiver Kieran Wallace of KPMG, extended to around 1,096 sq m (11,800 sq ft), and also incorporated warehousing and the open yard on a site area extending to approx 0.25 hectares (0.6 acres). Not surprisingly, Wallace flagged the fact the store “enjoys a lucrative turnover in this densely populated eastern residential district of Dundalk town” and “has the added attraction of providing the local post office, as well as generating turnover from the lottery, off licence and hot deli business." No doubt this over three-quarters of a million price tag is also a long way off what a convenience store of this nature would have fetched had it been sold during the 2007 property heyday.
Variation of retail stock density
Of course, a low price in relative terms is not enough to make a property attractive. Properties need to be available in high footfall areas in order to entice those hoping to invest sensibly to dust the cobwebs off their wallets. According to CBRE, while there was an increase in the vacancy rate on Grafton Street compared to the same period last year due to some high-profile retail closures, the level of ground floor vacancy along the prime shopping streets in the capital still remains relatively low, with only one store vacant on Henry Street at the end of Q1. Lisney’s Aoife Brennan tells ShelfLife that while “availability on Grafton Street is relatively high, this should improve over the remainder of the year due to the levels of demand we are currently seeing for the street from retailers, mainly international.”
CBRE’s research also shows there is an unexpected variation of density of retail stock across the country, with some areas undersupplied and others now having considerably more stock than the national average.
According to the study, county Louth has the greatest overall retail density in the country with over 1,220 square metres of shopping centre and retail park accommodation for every 1,000 people living in the county – equating to a density that is 94% greater than the national average. Breaking the analysis down further, the study shows that Westmeath has the highest density of shopping centre space in the country with 82% more space per 1,000 people than the national average while Carlow is the most dense retail park location with three times more retail park stock per 1,000 people than the national average.
Suzanne Barrett, associate director of research at CBRE, who compiled the analysis, notes that: “The new Retail Planning Guidelines suggest that there should be a presumption against further out-of-town retail parks and this study certainly highlights on a county level where this presumption should hold strong. However, as close to 70% of the country is below the national density average for retail parks and over 60% is under the national shopping centre density, there is still merit for future retail development in suitable locations, considering the size and age profile of the Irish population.”
Finding a “suitable location” will naturally involve a great deal of research on the part of prospective retailers, but the good news is that properties previously out of reach have now become much more affordable. With that in mind, we decided to provide a quick price guide on the types of properties and prices you can expect to find across the country. Although for the more ingenious among you, we know that converting everything from an office block to a car showroom would not be beyond reach! With that in mind, for those of you hoping to take a plunge into new territory, all that is left to say is a simple “Good Luck!”
A snapshot of pricing nationwide
WATERFORD
Bus Eireann Bus Station, Merchants Quay, Waterford City
€10,000 yearly (€833 per month)
Retail unit to let
226 sq. feet (21 sq. metres)
Details: Shop in bus station available to let on a four year lease/licence.
KILKENNY
Murphys Corner Shop & Residence, 8-9 James’s Green, Kilkenny
€20,000 yearly (€1,667 per month)
Retail unit to let
1,000 sq. feet (93 sq. metres)
Letting agent: FitzGerald Auctioneers
C-store and house for lease as a going concern with a substantial turnover. Includes deli, separate commercial kitchen and preparation area, National Lottery and Payzone agent
CORK
Mac Curtain Street, Cork City Centre, Co. Cork
€900 monthly
Retail unit to let
371 sq. feet (35 sq. metres)
Details: Loose tea and coffee shop to let with or without stock. Includes large cellar and small yard.
GALWAY
Teresa’s Fruit & Veg, Mary Street, Galway City Centre, Co. Galway
€400 weekly
Retail unit to let
650 sq. feet (60 sq. metres)
Letting agent: O’Donnellan & Joyce
To be let as a going concern or vacant retail unit. Successfully run fruit and veg business established for over 25 years (owner retiring)
MAYO
The Square, Charlestown, Co. Mayo
€600 monthly
Retail unit to let
2,000 sq. feet (186 sq. metres)
Letting agent: Blue Property Rentals
Fully fitted out c-store located in prime location in Charlestown town centre.
MAYO
The Square – Supermarket to lease, Charlestown, Co. Mayo
€250 weekly
Retail Unit To Let
3,000 sq. feet (279 sq. metres)
Letting agent: Joseph A. Mellett Ltd.
Fully equipped modern supermarket in the middle of a thriving town. Can be leased or purchased
DUBLIN
South Circular Road, Rialto, Rialto, Dublin 8
1,084 monthly
Retail unit to let
700 sq. feet (65 sq. metres)
Letting agent: AMPM Lettings
Shop at the corner of South Circular Road and Dolphin’s Barn. Busy location; currently a general type shop but suitable for many types of retail. Rates €2,200 PA Insurance €550 PA
LONGFORD
Main Street, Granard, Co. Longford
€399,000
Retail unit for sale
475 sq. feet (44 sq. metres)
Selling Agent: Martin Shortt Auctioneers
Light grocery, lotto agency shop with potential for living accommodation or apartment to let in prime central location
KERRY
Duagh Village, Listowel, Co. Kerry
€650,000
Retail unit for sale
2,500 sq. feet (232 sq. metres)
Selling Agent: Global Properties Ltd
Convenience store, petrol station and post office located in village only five miles from both Abbeyfeale, Co. Limerick and Listowel, Co. Kerry
Related Articles
Euronics sponsors National Brown Bread Baking Competition 2024 →
Dawn Meats celebrates opening of South Korean market →
Lidl Ireland named Most Reputable Retailer in Ireland RepTrak 2024 study →
Fans 0
Followers