Potential for Irish retail weakening - CBRE

CB Richard Ellis have cast doubt on further growth in the Irish retail market. 'Considering the quantum of retail accommodation that has been developed in Ireland in recent years and the fact that consumer spending is now slowing, the potential for strong rental growth in the Irish retail sector is weakening', the Irish office of the property adviser said in its latest Retail Market overview.

Despite the less favourable economic prospects however, the property adviser said the Irish retail market continued to perform well. The report highlighted that the volume of retail sales grew by 4.7% in 2007 and that Irish consumer spending on a per capita basis is still considerably higher than the EU average. ‘The general consensus is that consumer spending in Ireland will grow by approximately 3.0% in 2008 and again in 2009 - a rate of performance that is still very impressive compared to the rest of Europe and the UK.’ Nonetheless, prime yields in the Irish retail sector have moved out slightly with prime high street properties in Dublin now yielding 2.75% and prime shopping centres yielding approximately 4.0%.

The property adviser found that although the level of retail shopping centre development in Ireland is higher than in many other European countries (at approximately 430m² per capita), concerns about oversupply were exaggerated. ‘Our research indicates that the total quantum of shopping centre accommodation in Ireland will reach over 1.94 mln m² by year-end 2008. Developers now appear to be more cautious regarding shopping centre development. In any event, the scarcity of development finance in the current market is inhibiting further speculative development.’

The report also found that the surge in the development of retail park facilities around the country now appears to be easing off. CBRE research found that over 175,000m² of new retail park accommodation will come on stream in Ireland over the next two years, of which almost 50% is located in Dublin. This includes the eagerly-awaited 30,500m² IKEA development, which is due to open next year. And over 350,000m² of new shopping centre accommodation will open before the end of 2009, of which approximately 20% is located in Dublin.