Dublin, June 28th, 2018 – Sandra Fitzgibbon (Associate Director, Retail)
Irish retail has seen significant changes over the past decade and has gradually entered a new cycle over the past couple of years. Rents have increased moderately, while a number of new entrants have also entered the market. With the retail environment evolving rapidly, questions and challenges have been posed for both physical stores and e-commerce and as such, the new entrants bring with them more specific requirements than previously witnessed. In response to this, development in the market has grown with a modest but steady stream of builds in the pipeline.
Until recently, construction activity has been stagnant, with no major retail construction since 2011. This has resulted in a supply challenge in some prime areas. In particular, the market has always struggled to provide large quality units on the prime streets such as Grafton Street and Henry Street, which are key focused areas for new entrants to the Irish market.
An analysis of the existing stock on Grafton Street and Henry Street by floor size carried out by Cushman & Wakefield, highlights the limited number of large scale units that exist on the city’s prime streets. On Grafton Street, 72% of stores have a trading area less than 230 sq m in size with only 14% of stores trading on multiple levels. On Henry Street, the story is somewhat similar with almost 56% of stores having a trading area less than 230 sq m in size and 24% on multiple levels.
This becomes more relevant when you consider those new entrants such as Victoria’s Secret, &Other Stories (H&M Group Brand), and more recently The White Company. The common trend amongst all these retailers were large floor plates, trading over multiple levels. The core retail pitch must continue to adopt if we are to attract new entrants to the market.
The development response to this is evident on some of the streets surrounding these areas, as options to create larger formats become more limited. Grafton Street is a great example of this. There is existing and pipeline development on Nassau Street, College Green, Chatham Street and Dawson Street. On Henry Street, limited options for larger retailers also exists, albeit not to the same extent. Construction is in advanced stages at 7-9 Henry Street, which UK retailer, Next, will fit-out. The significant store of over 3,250 sq m will serve as a new flagship in Dublin City Centre. Furthermore, JD Sports recently upsized into an existing large unit in Jervis Shopping Centre, facing onto Henry Street. The surrounding environs also have pending development with Clerys and Dublin Central, two sizeable projects starting to feature more prominently. When finished this will strengthen the North City Centre retail offering.
In the shopping centre arena, the more recent trend is modest expansions through extensions as well as upgrades to malls and public space. The focus has not only been to enhance the look and feel of the centres, but also to improve the retail, food and beverage (F&B) and leisure offering. The aim of such work is to improve the overall consumer experience. This is set to continue, with all the regional shopping centres located along the M50 having existing or pending planning permissions for further extensions. The only new build shopping centre in Dublin is the much-anticipated Cherrywood Town Centre, which recently received planning permission and has an estimated delivery in 2021.
Outside of Dublin, there are some signs of development albeit at a much slower pace. Again, the trend is expansion as opposed to new build, with the opportunity being driven by existing tenant demand and new requirements. This is focused in the key cities of Cork, Galway, Limerick and Waterford. A prime example of this is the Crescent Shopping Centre, Limerick, which has recently completed its latest extension and refurbishment. As a result, a number of new occupiers opened in the centre which include, GAP, Superdry, Selected and Smiggle.
On the occupier side of the market there remains challenges, particularly around impact of ecommerce v’s Bricks & Mortar. The ongoing Brexit negotiations have not helped either and with many UK retailers experiencing difficulties in their home market, it has made some naturally cautious when considering further expansion. Despite this, there is still a steady flow on new entrants attracted to Dublin and Ireland’s economic landscape. In the past couple of years, Victoria’s Secret, &Other Stories (H&M Group), The White Company, The Ivy, Smiggle, Hotel Chocolat, Sostrene & Grene and Homesense, to name a few, have all entered the Irish market, with further new entrants rumoured. Separately, Ireland has a solid and growing group of indigenous home-grown brands, who are also seeking further growth; Elverys, Carraig Donn, Easons, Bookstation, The Wright Group and Press Up Group to name a few. We need to acknowledge this growth, which is significantly different to the market a few years ago, and although the negative voice tends to be the loudest, new store openings and growing retailers are still emerging and that should be recognised. That is, not to take anything from the challenges being faced by some retailers.
Some of these challenges and threats are due to new trends and changes in consumer habits, and retailers must evolve to survive. This is not only the role of the retailer, this is also the role of the shopping centre owners and landlords to ensure developments are fit for purpose and capture the retailer requirements to optimise their trading potential.
Some developers, landlords and retailers are already responding to changing consumer and retailer demands in an effort to keep up. However, the current market also presents further opportunities to adapt assets to meet these changing demands. Such adaptations will accommodate the new entrants, trends and concepts in the retail market and are necessary over the coming years in order to stay relevant for the consumer. There has been a consistent flow of new occupiers into the Irish market over the last few years at modest levels, but it remains important that the available space in our market is on trend and the space responds to the consumer expectations of the “shopping experience”.
Cushman and Wakefield have recently published a development pipeline report which provides a market snapshot of key planning permissions and retail developments under construction.