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Investor appetite for Irish retail assets is on the increase

Investor appetite for Irish retail assets is on the increase

Investor appetite for Irish retail assets is on the increase, according to a new report from agent CBRE.

It claims that 54% of investor spend in the third quarter of this year was associated with the purchase of retail investments. However, over the year to date, 21% of the €2.2 billion invested in Irish income-producing assets was in retail. This is down slightly from the 23% figure recorded last year.

Crucially, though, CBRE’s figures for this year do not include the recent sale of Project Jewel for €1.85 billion. This portfolio included three of Ireland’s most successful shopping centres – Dundrum Town Centre, Ilac Shopping Centre and Pavilions Swords – and was bought by Hammerson and Allianz.

“38% of the shopping centre and retail park acquisitions over the last two years were completed by private equity companies such as [US hedge fund] Varde and Davidson Kempner whereas 21% of the shopping centre/retail parks were acquired by opportunistic investors such as Marathon and Oaktree capital partners,” says Natalie Brennan of CBRE.

“The ownership structure of shopping centres is now vastly different to what it once was. The most prominent shopping centre landlords in Ireland are Irish Life, Iput, Hines [which acquired Liffey Valley Shopping Centre], and new entrants Hammerson & Allianz.”

CBRE also reports that following some rapid yield contraction between 2012 and 2014, prime yields for shopping centres stabilised over the first half of this year. Prime yields for super prime shopping centres in Ireland are about 4%, it says.

Retail rents

The agency also suggests that retail rents in shopping centres were less affected by the 2008 crash than those in prime high street locations. “Retail rents in the main Dublin shopping centres have remained stable over the last three-year period,” according to CBRE.

However, a lack of supply of retail space in prime shopping centre locations is fuelling “competitive tension and rental growth” in some locations.

Prime zone A rents in Dundrum Town Centre are now about €4,000 per sq.m while in Blanchardstown Town Centre the figure is €2,500 per sq.m and €2,250 per sq.m in Liffey Valley.

Bernadine Hogan, who specialises in shopping centre leasing at CBRE, says prime shopping centres are resurgent given the number of major international brands entering the market. “These include Mint Velvet, Calvin Klein, Vans, Quiz, Liverpool footfall club, Aéropostale and Pandora, to name a few. This is principally on the back of improving retail sales, higher levels of disposable income and improving footfall.”

The food and beverage sector is performing particularly well in shopping centres at the moment, says CBRE. Average rents range from €484 per sq.m to €753 per sq.m in prime shopping centre locations, as evidenced by recent lettings to Milano, Nando’s and Arc in Liffey Valley Shopping Centre.

“The demand for food and beverage space is outstripping supply within Dublin, in particular,” says Ms Hogan. “This is supported by new entrants such as Le Pan, Five Guys, Burger and Lobster, Cow, Giraffe, Cosmo, Las Iguanas, Gaucho, Prezzo, Ask and Zizzi all looking for potential locations.”

Economic growth

In terms of retail space, Ireland was “under-shopped” in the late 1990s relative to its peers. On the back of favourable demographics and strong economic growth, the amount of retail park and shopping centre space effectively doubled between 2005 and 2009. But, following the crash, development of new retail space has halted.

CBRE says Ireland’s total stock of shopping centre space (more than 5,000 sq.m) is about 1.78m sq.m (19m sq.ft). Dublin’s stock of shopping centre space stands at just less than 600,000 sq.m (6.45m sq.ft) with 36 retail centres in the capital with more than 5,000 sq.m of space. In comparison, Cork has 14 shopping centres at more than 5,000 sq.m.

According to CBRE, 68% of Ireland’s shopping centre stock of more than 5,000 sq.m is in Leinster with 25% in Munster. Just 7% of the national shopping centre stock is in Connaught.

Article by Irish times