Q3 2007: CBRE Irish Retail Market Report
CB RICHARD ELLIS | MARKET VIEW
Irish Retail Market View
Q3 2007
The Irish retail market continues to perform strongly, with impressive consumer spending recorded in the first half of 2007 despite the explosion of negative economic commentary which has dominated the media in recent months. According to the Central Statistics Office, retail sales in Ireland continue to grow by more than 7% on an annual basis at a time when many other European economies are struggling to sustain low single digit growth. That said, conditions in the Irish retail property market continue to become more competitive and many commentators are expecting consumer spending to slow over the course of the coming months.
Despite continuing to perform well the retail sector is unlikely to achieve the double digit investment returns associated with it in the recent past. In addition to the pressure posed by increasing interest rates and threats of slowdown in the Irish economy in the medium term, there has been a huge development response in the Irish retail market in recent years, which could pose a threat of oversupply in some locations across the country over the coming years. Our research indicates that the total stock of shopping centre accommodation in Ireland is now approaching 1.6 million m2 while the stock of retail park accommodation in Ireland has now exceeded 1 million m2.
Considering the phenomenal population growth witnessed in Ireland in recent years, as evidenced in Census 2006, this development response was undoubtedly merited. With further population growth anticipated, it is evident that large swathes of the country are still undersupplied in terms of quality shopping facilities. However, considering the quantum of retail accommodation that has been developed in the last decade alone, there are also locations where oversupply remains a real threat and needs to be monitored carefully. The clearest evidence of increased competition in the market is the fact that retail rents, although continuing to increase, are growing at a slower pace than they have done in the last decade, to some extent as a result of increased resistance from retailers amidst fears of slower consumer spending in 2008. Investors continue to seek out retail investment opportunities and have been focussing in particular on older retail properties where there is opportunity to redevelop and enhance facilities and in turn to boost value. From a demand perspective, retailers continue to seek opportunities in new schemes across the country. Considering the fact that Irish consumers continue to become more discerning, the biggest challenge for the development community is to continue to provide new and innovative designs and to introduce new retail brands and formats to Ireland for the first time.
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