The first six months of 2009 have been ‘extremely difficult’ for the Irish retail market according to property services firm CB Richard Ellis.
In its Retail MarketView report on the Irish retail property sector published today it said that consumer confidence has deteriorated sharply, aggravated by the rise in unemployment since the beginning of the year, and this is hampering retail sales activity.
It said retail sales were down 8.2% in the year to March 2009 whilst the annual deterioration was 17.9% when motor sales are included. It said while CBRE’s pedestrian footfall counts on Dublin’s prime high streets had not fallen consumers were spending less and ‘being more cautious generally’.
CBRE said there has been a ‘notable decline’ in retailer demand in recent months although some sectors of the market such as discount retailers continue to perform relatively well and continue with expansion plans. It said certain struggling retailers are negotiating with landlords to secure temporary rent discounts and retail rents have generally been declining across Europe in the last six months and ‘this has certainly been witnessed in the Irish market’.
The retail development pipeline has also been ‘significantly curtailed’ as a result of the lack of finance to support development activity and many retail schemes have been put on hold.
It said around 60,000 sq m of new shopping centre accommodation will complete in Ireland in 2009 while more than 35,000sq m of new retail park accommodation will have been completed by year-end.
‘However, it is difficult to estimate the quantum of new retail accommodation that will be completed in Ireland in 2010. While a lot of schemes were scheduled to come on stream in 2010, many of these projects are now on hold.
'However, there is more than 80,000 sq m of new shopping centre accommodation currently under construction that is scheduled for completion next year and more than 40,000 sq m of retail park development under construction that is scheduled to come on stream in 2010. There will as a result be a limited number of new retail opportunities coming to the market over the next number of years,’ it said.
Cormac Kennedy, CBRE’s director of retail agency, said: ‘No-one is denying that conditions in the Irish retail market are challenging at the moment. However, the reality is that while the retail sector has weakened relative to last year, there are still deals being completed, albeit on different terms and conditions than those completed at the peak of the market. Ultimately, the economy will improve and the retail sector will emerge stronger and more competitive as a result of the difficult trading conditions it is currently experiencing.'
Marie Hunt, director of research at CBRE, said that in the Irish retail investment market the yield movement in the last 12 month period ‘has been considerably more aggressive than that experienced in many other European markets, with prime retail yields in Ireland having increased from 2.5% to 6.5% since July 2008’.
However, she said that most of the value correction in this cycle has already taken place in the Irish market and weakening rental prospects have to a large extent already been factored in unlike some other European locations where yield movements are still occurring.