Vulture funds pushing up rents at leading shopping centres
Tenant at Blanchardstown S.C. speaks out on rising rents in the Sunday Business Post 'on condition of anonymity'
10 April 2017
Retailers are facing increased rents by vulture funds and institutional landlords according to the Sunday Business Post, with Blanchardstown and Dundrum facing the largest increases.
Blanchardstown S.C. is currently facing its “highest vacancy rate” since the depth of the recession with nine unoccupied stores in the shopping centre with Compu B being the latest retailer to leave, according to a Fora analysis.
In 2016, Blanchardstown S.C. broke state records when it was sold for €945m in the largest sale of property in the history of the state; to Blackstone, an alternative investment fund based in New York City with assets totaling €31.5bn .
Fashion retailer French Connection has also left the shopping centre in recent weeks with Fora reporting “that its closure was caused by a hike in rent by centre management, although the firm had no-one available for comment at the time of publication.”
According to the Fora report, a number of other Blanchardstown S.C. tenants have expressed their concerns about rising rents with one tenant, who speaking on condition of anonymity, said their “rent has risen ‘significantly’ since Blackstone took control of the centre.
“The new owners seem to have a merciless way of dealing with tenants – there is no leeway with them, they just want their money.” said the tenant.
The significant increases of rent on retailers has the potential to increase job losses and multiple closures.
Research performed by Savills, a global real estate service provider, found that earnings and incomes do not have a big influence on retail rent, but found that employment had the biggest impact on the rise in retail rent with a 1% rise in jobs growth bringing about a 0.9% increase in rental growth 15 months later.
“A reasonable interpretation is that the security of income that comes with having a job is much more important than the size of that income in driving consumer demand and, ultimately, retail rents.” said Savills.
In 2016, the retail sales index increased by 4.7% and unemployment rate is currently at 6.4%, its lowest since June 2008 according to figures from the Central Statistics Office.
As the economy continues to grow stronger and vulture funds control a lot of prime Irish retail space there doesn’t appear to be a slow-down in rent increases anytime soon.