REMEMBERING NAMA’RAMA

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Former British Prime Minister Harold Wilson once quipped that “a week is a long time in politics”. While not a politician I can personally attest to the fact that 20 years is most definitely a long time in the commercial property profession. Having commenced employment with Bannon in the heady days of January 2005, there have been many ups, downs and ‘back-up agains’ in between.

The initial years of my career in Bannon, and the development land department specifically, were filled with developer flyovers via helicopter, seven figure deposit cheques, foreign Christmas parties (!) and a general ‘the only way is up’ attitude fuelled by copious Kool-Aid consumption long before the phrase became fashionable on this side of the Atlantic. By the Autumn of 2008 the seismic collapse of Lehman Brothers heralded the onslaught of the great financial crash and the development land sector in Ireland (as in most parts of the world) ground to a crushing halt. Thoughts of ‘what now?’ quickly took hold amongst property professionals and the answer came in the form of four letters which would dominate the sector for many subsequent years, NAMA.

The National Asset Management Agency was founded in 2009 and valuers were contracted to conduct asset valuations by either the lending institution transferring loans over to NAMA or by NAMA itself to provide checks and second opinions. And so ensued a colossal nationwide valuation exercise of every conceivable property asset ranging from abattoirs to retail parks and everything in-between. Overnight, investment agents and leasing teams who were largely at a loose-end due to inactivity in their sectors were seconded to put their shoulder to the wheel and reacquaint themselves with ‘The Red Book’. It’s unlikely that we’ll ever experience a valuation exercise on such a scale in this country again with property assets worth an estimated €50 billion valued over the space of three years in the depths of a recession.

While valuations could never claim to be the sexy side of the profession, the NAMA valuation process kept the lights on, wages paid and demonstrated the resilience and flexibility of the fledgling Bannon brand which not only weathered the storm but flourished in the post-apocalyptic commercial property market. Niall Brereton is a Director of the Professional Services & Land Department in Bannon.

Image taken from NAMA

Statistics on Household Savings

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The Central Bank of Ireland’s most recent stats of household savings for February 2024 were neutral, having only increased by 0.7% from January. Reflecting on previous years statistics can provide a better insight into the extent of household savings in Ireland. Since 2019, savings have risen to 47%. This echoes the public’s continued desire to save since the financial crash of 2008. The public has remained cautious with their money since the crash with household savings having increased 85% from 2008. Annual household savings have begun to stabilise in recent years. The increase in savings from February 2021 to 2022 was 7.2%, dropping to an increase of 5% from February 2022 to 2023. In the last year it increased by only 3.3%, reaching €153.6bn.

This is interesting from a consumer spend perspective. Whenever Irish consumers are eventually comfortable with the level of their savings, now an average of over €30,000 per person, will the surplus cash that they have been squirreling away find its way into the tills of Irish retailers?

Statistics on Household Debt

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The Central Bank of Ireland released their statistics on household debt for February 2024. The 12 months to February 2024 saw a €1.33bn rise in household debt, a 1.3% increase. Some of this increase might be reflective of the ongoing growth in housing construction leading to more new mortgages being drawn down. The level of household savings however remains 52% higher than debt, reaching €153.6bn compared to €101.3bn in household debt this February. The continued strength of the Irish consumer balance sheet supports a very positive outlook for consumer spending going forward.

Budget 2024

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The Government aims to have 80% of Irish electricity come from renewable energy. As part of Budget 2024 a €380 million fund has been announced to help households with the green transition and reduce greenhouse gas emissions and energy bills. The doubling of the tax disregard in respect of personal income received by households who sell residual electricity from micro-generation back to the national grid will also promote the greening of the housing stock nationwide.

Bannon is proud influencing the greening of the Irish Commercial Real Estate Sector through the procurement 100% Green Renewable Energy across their Property Management Portfolio. In addition to this, Bannon works closely with our partner Evia – Sustainable Real Estate to implement green initiatives to reduce the carbon and improve the sustainability initiatives of commercial real estate assets across Ireland.

 

 

 

 

 

 

Budget 2024

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Budget 2024 announced the establishment of a new Infrastructure, Climate, and Nature Fund, which will grow by €2 billion for seven consecutive years, reaching €14 billion. The purpose of this fund is to ensure there is no reduction in capital investment if the economy goes into a downturn. It will be run on a more short-term basis than the Future Ireland Fund. Up to 22.5% of the fund can be used for climate and nature-related capital projects in any year from 2026 up to a cumulative maximum of €3.15 billion.

The fund can also be tapped for general investment in infrastructure, which will take precedence during a downturn. 25% of the fund can be used in a year when there is a significant deterioration in the public finances. The fund will be managed by the National Treasury Management Agency.

 

 

 

 

 

 

Irish Consumer Sentiment Hits 15-Month High

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Irish Consumer confidence improved again in June reflecting a 10.4% y-o-y increase. Tentative signs that food and energy price inflation might have peaked seem to have encouraged a slight easing in concerns around household finances. The exceptionally good weather may have also boosted the mood of many consumers, but the modest monthly gain suggests financial clouds are still hanging heavily over many households and economic sunshine is still hazy for some.

Unemployment reaching a record low as weekly Earnings Soar

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The Irish consumer market continues to showcase its strength and resilience. According to the latest report by CSO unemployment has hit a record low of 3.8%, while weekly earnings have reached a new high of €923.48.

This remarkable achievement is even more significant when considering that seasonally adjusted unemployment is now 50% lower than its peak during the Covid pandemic two years ago. Furthermore, the Irish labour force has surpassed 2.7 million for the first time in recorded history, and average weekly earnings are 20% higher than pre-Covid levels. With such positive indicators, the outlook for the Irish retail market is incredibly promising.

When the Market Stall’s – Where is Dublin’s Market?

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One doesn’t have to go back too far into the archives to find headlines relating to markets in Dublin. Recent headlines include the uses of the Fruit & Veg Markets in the north inner city, the future (or fate) of the Iveagh Markets in The Liberties and plans for a market use at CHQ alongside EPIC, Europe’s leading tourist attraction (World Travel Awards). With the concept such a visited topic one looks to examples, both here and abroad, of where markets exist in cities as major attractions, creating hubs of activity that provide a platform to promote local, independent businesses, producers and suppliers and exhibit the tastes and cuisines of the area.

In Ireland, the most prominent example is of course Cork’s famous English Markets. Developed and owned by the Council, this traditional food market first opened in 1788 and remains as a hub of retail activity, with independent, local stallholders (some generations old, others local start-ups) selling a variety of fresh food and artisanal goods. While the dominance of a grocery offer suggests the target clientele are largely locals, a combination of atmosphere and architecture makes the market a major attraction for the City.

The Time Out Market in Lisbon is considered as a must-do when visiting the Portuguese capital. The market was founded by the publishing company with a vision to showcase the best business ideas and projects in Lisbon. The market now contains restaurants, shops, bars and a music venue alongside fruit & veg, meat, fish and flower vendors. London’s Camden Market has developed into a retail, food & drink destination in London, comprising over 1,000 shops, stalls and stands with an array of unique independent offers. Other examples include Mercado in London and Mercado de San Miguel in Madrid.

A common theme of these markets is the presence of independent, local operators. These operators allow the markets offer something unique and different from the traditional high street or shopping centre mix. The artisan nature of these vendors can serve to promote the markets as a tourist destination where visitors can experience local cuisine and support local producers. The planning submitted for the proposed market offer at CHQ is an opportunity for an exciting market offer to break into Dublin and the recent pop-up, Me Auld Flower market in the Fruit & Veg Market in Smithfield as part of the St Patrick’s Day Festival may indicate that more exciting development lies ahead.

If you want to discuss the retail dynamics of City & Town Centre further you can contact us @consultancy@bannon.ie

 

Author:                 George Colyer, Surveyor, Bannon 

Date:                     3rd April 2023

 

Retail Healthcheck with Neil Bannon

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Neil Bannon joined Newstalk Bobby Kerr on Down to Business on Saturday to discuss what we might do to attract the investment our towns and cities need right now.

To listen to the full podcast, click here.

 

Why Ireland for retailers? Why Not Ireland.

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When a retailer considers expansion within or entry to a new territory, they must assess a wide range of factors to make a financially viable decision. Rather than Why Ireland, the Bannon Retail Team are using economic data to demonstrate to retailers – Why Not Ireland.

To start, there are several key statistics to Why Not Ireland:

  • Ireland is 1st in Europe for Economic Growth.
  • The country is 1st in the World for Business Productivity and Efficiency.
  • Census 2022 reported Ireland’s highest ever population of 5.12 million.
  • Ireland’s population has grown 21% in 15 years and is set to reach 6.334 million by 2050. This is the second biggest population growth projection in Europe. In comparison more than half of Europe is projecting a population decline.
  • Ireland now has more than 2.63 million people in employment the highest level ever recorded. This growth has led to higher wages and higher disposable income levels.
  • Irish households are now 40% wealthier than in 2007.
  • Irish household savings hit an all-time high in June 2022 of €145 billion euro while household debt continued to decline.
  • Retail sales are 29% above 2005 levels.
  • Ireland welcomed 7.2 million visitors during the first half of 2022, in comparison 2019 saw 11.3 million tourists for the full year.

The statistics don’t lie. These hard facts are aiding the post Covid retail recovery, providing confidence to expand to retailers and investors. This is evident in the number of new entrant brands who have recently signed expansion deals in Ireland including Lego, Russell & Bromley, Flannels, Carhartt & Pret A Manager to name a few.

The Bannon Retail Team is in active discussions with a range of additional new entrants. Some are considering Ireland ahead of the UK for store expansion. This is a significant shift away from the traditional route of opening in the major urban UK markets first.

Increased spend and the resulting increase in turnover is aiding retailers to make decisions to expand outside of the prime focus of city centres in Dublin, Cork, Limerick, and Galway. For example, Bannon recently welcomed Rituals to Marshes Shopping Centre in Dundalk. This demonstrates how a brand’s confidence in Ireland has seen retailer expansion strategy grow from Grafton Street to regional towns.

Whilst it might be viewed as a small country for expansion, the data provides a strong business case for retailers to decide Why Ireland should be a primary focus in their ongoing expansion plans.

 

Author:                  Jennifer Mulholland, Divisional Director, Bannon

Date:                     12th October 2022

Weathering a perfect storm in Commercial Property Service Charges

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As per the SCSI / RICS Code of Practice definitions, service charges in commercial property enable an owner to recover the costs of servicing and operating a property. This is for the benefit of the occupiers and users of the services and facilities provided within the property.

The service charge arrangement is dictated by the lease of the property and presents what responsibilities fall to the service charge regime and what responsibilities fall to the occupier.

One of the key roles of the Bannon Property Management team is compiling the annual service charge budgets for the assets under our management.  When doing this work, we are conscious of the impact service charge regimes have on occupiers and owners. If the budget is set too low, cashflow issues arise that affect the smooth operation of the asset. This can lead to a deterioration of the asset which will have numerous implications for users, occupiers and owners.  Alternatively set the budget too high and this impacts on the viability of occupiers to pay and ability to let units.

Having a high service charge per square foot also has an impact on the rental rates the owner can achieve. This in turn negatively impacts the asset value. Therefore, it is paramount that property managers are constantly reviewing, and tracking service charge spend. This is easier said than done.

When setting the 2022 service charge budgets in Q4 2021 no surveyor could have predicted the war in Ukraine and the subsequent disruption this would create in the world economy. It is hard to believe that the Russian invasion of Ukraine has resulted in the increase occupational costs for occupiers in Irish commercial assets!

Given the increase in operational costs worldwide since January 2022, most Irish commercial assets with service charge liabilities are looking at a balancing charge at the end of the year. This is when annual service charge expenditure has exceeded the annual budgeted figure. This is due to service charge budgets being set before an escalation of the War and subsequent impact on the global economy.

The current landscape is substantially different to when we were setting 2022 service charge budgets. With the ongoing energy crisis and global economic conditions, setting 2023 service charge budgets will be more challenging than ever. Significant increases in energy costs coupled with construction costs increasing by 14% over the past 12 months according to the SCSI’s construction cost index (July 21-June 22) have created these challenges. The addition of ERO (Employment Regulation Order) increased hourly rates for cleaning and security professionals, combined with these challenges, means that we are dealing with a perfect storm.

it is imperative that the property manager strikes a balance between having a sustainable and affordable service charge budget, but to also ensure there are funds to maintain the common areas.

This is a fine balance and Bannon predicts service charge regimes will increase significantly in 2023. This will lead to hard choices for asset managers and owners. As market leaders, Irish-owned Bannon manages multiple commercial assets including shopping centres, retail parks and offices throughout Ireland. We have significant experience in setting and managing service charge budgets, helping our clients find this balance.

 

Author:                 William Lambe, Divisional Director, Bannon 

Date:                     5th October 2022

Consumer Sentiment

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Sustained slide in Irish consumer sentiment points to major reassessment of economic and financial conditions.

The KBC Irish Consumer Sentiment Index slipped again in May for the fourth consecutive month. The previous four occasions this has happened in the twenty-six-year history of the survey reflected circumstances in which consumers faced marked difficulties in assessing potentially momentous changes in economic conditions. The last time the survey slipped for four consecutive months was in the summer of 2019 amid concerns over Brexit.

The current slippage follows the conflict in Ukraine and electricity/gas price hikes of 15-40% implemented by energy providers in the past two months. However, credit/debit card and Retail Sales data do not yet point to any material slowdown in spending, with expenditure on hard hit sectors such as accommodation and hospitality still recovering in May.

Retail Parks Prove to be Resilient During Covid

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Looking back over the past decade the retail property market has experienced a tumultuous time.  Recession following a boom, followed by a resurgence, then the impact of Brexit, Covid, the move to more on-line shopping, and more recently the war in Ukraine.  Retailers and the retail property market have been the hardest hit during this period, and it may be some time before the market stabilises. However, one sector within the retail property market has outperformed in the last 3 years.

Retail Parks have come through the past two years’ experience in an even a better position that before.  The sector has been the beneficiary of multiple factors.

The closure of other retail outlets funnelled consumer spend into retail warehousing parks as the only outlet for frustrated shoppers. This was helped by the nature of retail warehouse parks versus enclosed shopping centres. As large boxes with plenty of space for social distancing, they offer surface outdoor parking and ease of access for click and collect purchases.

What also helped was the focus on the products that are typically sold in retail parks. There was a perfect storm of an increase in home improvements and outdoor activities being a major focus for Covid bound customers acquiring items such as:

  • DIY
  • furniture and soft furnishings
  • the need for new electronics to assist with remote working and learning
  • an increase in pet ownership
  • toys for housebound kids
  • a boom in healthy pursuits driving sales in sports/leisure stores.

This all led customers to their local retail park.

The Bannon Retail Team has seen this resurgence across our extensive portfolio of Retail Parks that we lease and manage. Car numbers in retail parks are up considerably when compared to 2019 numbers, which is a different story when compared to the reduction in footfall that is being experienced in enclosed shopping centre and city centre environments. 

Vacancy rates in retail parks were already low in Q1, 2020.  The acceleration of transactions during and after the third Covid lockdown has pushed vacancy rates to a very low percentage.  Schemes such as Limerick One Shopping Park and The Retail Park Liffey Valley currently have vacancy rates at a long-term low.

New to market retailers and those slow to expand pre-Covid are now seeking increased representation in the better parks in Dublin and provincial locations.  This supply and demand dynamic may encourage owners of retail warehouse parks to start considering expanding their schemes to cater for this renewed demand.

Retailers keen for further expansion include Dutch furniture retailer JYSK, global sports brand Decathlon, Next Home, Homesense, Home Store + More, Party City and EZ Living Furniture/Interiors to name a few.  This sector of the retail market will be keeping us busy for the foreseeable future.  

Author:                 James Quinlan, Director, Bannon

Date:                     6th April 2022

Major changes to Leaving Cert will see students sit some exams in fifth year

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Major reform of the Leaving Cert is being planned from 2024 onwards which will include spreading project work and exams over fifth and sixth year.

The move aims to reduce student stress levels around the traditional written exams and introduce teacher-based assessment for projects and other course components.

Minister for Education Norma Foley is keen to proceed with reforms which would see students entering senior cycle in September 2023 sitting Paper One in English and Irish at the end of fifth year.

Over several years, 60 per cent of marks for all Leaving Cert subjects will be based on written exams and 40 per cent on additional assessment components such as project work, orals or practicals.

Teacher-based assessment of these additional components will be externally moderated by the State Examinations Commission.

The announcement on Tuesday follows a four-year review of the senior cycle by the National Council for Curriculum and Assessment (NCCA), based on consultations with students, teachers, parents and industry.

The review found while there was broad agreement exams should remain, it proposed giving greater weight to continual assessment, projects or other course components over a two- or three-year period.

On foot of Tuesday’s announcement, a selection of schools will shortly be invited to become pilot schools and participate at an early stage in revised curriculum and assessment arrangements.

Among the changes announced are:

* The introduction of two new subjects – drama, film and theatre studies; and climate action and sustainable development – which will be ready for students in pilot schools starting fifth year in 2024;

* An initial tranche of new and revised subjects will be available in pilot schools from September 2024, when students entering fifth year will study updated subject curricula, with updated assessment models in chemistry, physics, biology and business;

* Future oral exams and the music practical performance will take place during the first week of the Easter break of sixth year, as is the case this year;

* Leaving Certificate Applied (LCA) students will have improved access to maths and foreign languages from September 2022;

* A new qualification will be introduced at level one and two on the National Qualification framework to provide an appropriate level of assessment to some students with special educational needs, building on the equivalent programme at Junior Cycle level;

* Access for all students to a revised transition year programme will be encouraged.

Under Ms Foley’s plans, the NCCA and the State Examinations Commission will develop, in consultation with education partners, how an externally moderated, school-based form of assessment would operate.

However, teachers’ unions on Tuesday moved quickly to voice their opposition to any plan that involves members assessing their own students.

Teachers’ Union of Ireland (TUI) general secretary Michael Gillespie said: “Our members are fundamentally opposed to assessing their own students for State certificate purposes and therefore external assessment and State certification – which retain significant public trust – are essential for all written examinations and all additional components of assessment.”

Association of Secondary Teachers’ Ireland (ASTI) president Eamon Dennehy said certification in State exams must be “entirely externally assessed”.

“This must be retained in all aspects of the development of the Leaving Cert. It is vital that the integrity of the state exams system is maintained,” he said.

Ms Foley said the redeveloped senior cycle aims to deliver “equity and excellence for all”.

“This programme is timely and ambitious – we must not rush, but cannot delay. The timing I have set out will ensure that students will feel the benefits at the earliest possible time, with notice of these in advance.”

She said the reforms will reduce the pressure on students that comes from final assessments based primarily on exams.

“We will move to a model that uses other forms of assessment, over a less concentrated time period, in line with international best practice,” she said.

Ms Foley said these changes will enable the education system to maintain its high standards.

“Our current system has many strengths. But we know that it can be improved, to better support our students, to reduce pressure while maintaining standards, to keep pace with the changes in practices internationally and to meet the needs and expectations of our students and of our society in preparing our young people for the world ahead,” she added.

Article by The Irish Times.

Retail Sales

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The CSO (Central Statistics Office Ireland) reported retail sales values for all business increased 4.3% on pre-pandemic levels. Taking a deeper dive this figure includes bars which remain 28.45% below 2019 data. When bars and motor trade are excluded, retail sales values have jumped 11.6% when compared to 2019 and 2020.

This positive performance is despite the level of overseas travelers to Ireland remaining 35% below 2019 and 2020 figures. The full return of tourists to Ireland will spell further good news for the retail sector.

The Strength of the Irish Consumer

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The strength of the Irish Consumer was further emphasised this week with the CSO reporting a 2.0% annual increase in weekly earnings to €864.51 for Q4 2021. When compared to pre-pandemic levels this increase jumps to 9.9%.

The CSO Labour Force Survey also reported a year-on-year increase in the Labour Force (8.9%) along with a decrease in unemployment to 5.3% which resulted in record employment of 2.5 million people.

The result of these two factors can only be positive for the Irish retail market.

Author:                 Cillian O’Reilly, Surveyor, Sustainability Manager, Bannon

Date:                     2nd March 2022

Snap Fitness opens today in Waterford Retail Park

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Snap Fitness has opened its doors in Waterford Retail Park today and, similar to all Snap Fitness gyms around the world, the new Waterford gym will open 24/7 around the clock and will have a list of comprehensive cardio and strength-training equipment that are the highest in industry standards.

Snap Fitness has a global network with more than 1,000 centres worldwide in over 20 countries, including Ireland, United Kingdom, the United States, Australia, Canada and Hong Kong. Founded in 2003, Snap Fitness allows people to work out at a time and in a way that works best for them whether it is doing cardio, lifting weights, personal training or group fitness. They also use the latest fitness technology to elevate the experience, from the equipment in the gym to tracking via Myzone and the new Snap App.

Paddy O’Connor from Sigma Retail Partners, the asset manager for Waterford Retail Park, said “Snap Fitness is especially exciting for us as it is a unique offering to Waterford Retail Park and we are very happy that they are joining our strong tenant line-up. As part of our long-term strategy, we identified health and fitness as a category that would be very beneficial for the retail park. We are very pleased with the arrival of Snap Fitness and I am sure they will do very well.”

Waterford Retail Park is easily accessed from Waterford City and is less than 10 minutes’ drive away. The retail park is located along one of the main access routes to Waterford City from the M8 and N25 (Cork Road) and benefits from free customer parking. It is also located close to the Waterford Greenway and the new Costa Coffee store will be a great pit-stop for visitors heading to and from the Greenway.

Article by Sigma Retail Partners

Shop Local this Christmas

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Despite the uncertainty of COVID, it is great to see such optimism across our property management portfolio with over 40 new openings since we emerged from lockdown in May 2021. Shop Local this Christmas!

Dublin City Council session with Neil Bannon

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Our chairman and head of Consultancy Neil Bannon was invited to present to Dublin City Council this morning on how to tackle retail vacancy in Dublin City Centre, really positive session with great sharing of ideas & initiatives.

Investors follow footfall into retail parks as high street shuts up shop

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Covid-19 has flipped the performance of retail assets on their head. The previously-held view was that the prime to tertiary hierarchy was – city high street, major town centre, retail park, grocery retail and local necessity centres. However, in terms of demand and performance from the occupiers on the ground, this traditional hierarchy has now been reversed and is resulting in differentiation within a sector previously considered by many investors as a homogeneous entity.

Footfall

Footfall is a very effective barometer to highlight this shift. High street has undoubtedly been the most negatively impacted retail market sector with Covid-19 decimating footfall and in-shop spend. Bannon estimates that there are almost 40 shops either vacant or available on Grafton Street and Henry/Mary Street out of a total of 162. Similarly the hospitality sector, including food and beverage, like non-essential retail, has been severely impacted during Covid-19. Despite a strong recovery city centre footfall counts for Q3 2021 were still 30 per cent below 2019 levels. According to the IPD Index year-on-year total returns within the sector are showing minus 12.5 per cent.

In stark contrast the necessity retail sector (being grocery, medical and service-related offers) as well the retail parks have proved to be exceptionally resilient through Covid and continue to perform very strongly. Car counts in many retail parks for Q2 and Q3 2021 exceeded 2019 levels with retailers reporting considerable turnover growth. Provincially convenience-focused shopping centres have remained resilient with limited vacancy as shoppers choose convenience and to shop locally. We are seeing footfall levels return by up to 90 per cent of their 2019 equivalents.

In the latter half of 2021 the ‘money’ began to follow the data into retail parks as is evidenced by the position taken by AM Alpha in Nutgove Retail Park (€66.3 million) and M&G Investments through the acquisition of the Parks Collection Portfolio (€74.5 million) and the agreed acquisition of Manor West (€56 million). We estimate retail parks transactions will represent more than two thirds of all retail transactions in 2021 and will be the only retail sector within the IPD showing positive total returns for 2021 (currently running at plus 6.3 per cent).

Inflation

Supported largely by the threat of inflation, the resurgence in the retail grocery sector had already commenced pre-Covid in the UK and Europe, with long-let standalone grocery often trading at yield levels of between 4 and 5 per cent. This demand is beginning to emerge in the Irish market, with a shrinking gap between what the sector is trading at in the UK and the perceived value in Ireland. More recently we have seen a number of transactions which are at materially stronger yield levels than market expectation and these are due to sign before the end of the year.

Due to the structural limitations in scalability in the “grocery market” sector in Ireland (where most anchor stores are owner occupied) and the large delta which is developing between “pure grocery retail” and “necessity retail” (being service, health, medical and food-related occupiers) this sub-sector may come into more mainstream investment focus in 2022. The disconnect between the emerging grocery yields (5 per cent to 5.5 per cent) and those in the supporting “necessity retail” (9 to 10 per cent plus) seem irrationally high, especially as the necessity retail operator’s turnover is derived from the same customer base as their high-value grocery anchor neighbours. These centres along with retail parks serve to highlight opportunity within the sector where the negative narrative in the overall retail sector is keeping yields high despite resilient trading.

Rod Nowlan is an executive director at Bannon

Article by The Irish Times 

Neil Bannon on the Future of Dublin Retail

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Neil Bannon is a leading expert on retail property in Dublin. In the upcoming December 2021 issue of the Dublin Economic Monitor, Neil provides his thoughts on the future of the Capital’s retail core.

In advance of the publication, the below video gives a snapshot of Neil’s views on Dublin’s retail sector and the outlook for the future.

Article by Dublin Economic Monitor 

Household Debt to Income

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Yesterday the CSO released a version of Ireland’s national accounts. It shows that Irish Households now have more savings than ever before (€139bn up €50bn since 2016) & the debt to income ratio has fallen by half in the last decade. We have gone from being the most personally indebted consumers in Europe to being in line with the EU average, despite a younger population and a higher propensity to own our own homes. In real money that’s €70bn less debt. Added together that’s a €120bn (€24k per capita) turnaround in the nett position before you factor any impact from the increase in the value of housing.

The current strength in spending we are witnessing in our retail management portfolio is therefore not surprising but it’s hard to find much coverage of this benign backdrop in press commentary which is drawing comparisons with 2006. Irish consumers couldn’t be in a more different place than in 2006.

Donegal Boardwalk Resort sells for more than €3.8m

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A 27-villa holiday resort in Donegal has been sold for in excess of the asking price of €3.8 million.

The Donegal Boardwalk Resort, situated on the Wild Atlantic Way, has been purchased by Melcorpo, a property group.

Overlooking Sheephaven Bay, the resort was brought to the market in June by Bartra, and comprises 27 holiday villas, a fully licensed seafront bar, restaurant and function room. The property includes 45 acres, much of which is still undeveloped.

The resort adjoins the spectacular 1km-long boardwalk which links it to Tramore Beach. The renowned four-star Rosapenna Hotel & Golf Resort is a neighbouring property.

With so many people holidaying at home in 2021, Donegal Boardwalk had “an exceptionally busy summer” with full occupancy in July and August and is expecting a very strong shoulder season ahead.

The bar, restaurant and function room building is leased. The bar and eatery trades as “Hooked” and is a sister operation to the nearby Old Glen Bar and Restaurant where Ciaran Sweeney, former head chef at Dublin restaurant Forest & Marcy, is now heading up the kitchen.

Interest

A spokesperson from Melcorpo said: “We are delighted to be involved with such a great holiday facility in a beautifully stunning part of the country. We are looking forward to working in partnership with the local team leader George Scott and Cormac Walsh of Hooked to develop the resort further to its full potential as a premier holiday destination on the island of Ireland”.

Donegal Boardwalk is located within a short distance of the popular north Donegal tourist villages of Carrigart and Downings and sits just 30km from Letterkenny.

It is within a three-hour drive from both Dublin Airport and Galway and a two-hour drive from Belfast.

Bartra, who purchased the resort in 2017, when it was guiding €2.6 million, upgraded all 27 holiday villas, which are in turn-key condition, fully fitted and presented to a very high standard. Each villa benefits from a private deck.

Paul Doyle of selling agent Bannon said there was “strong interest” in the property, demonstrating the demand for quality tourist assets in Donegal.

Niamh Walsh of TDL Horizons, who advised on the sale said: “The level of interest shown from investors and operators gives us great confidence in the tourism sector.

Following one of the most uncertain 18 months for the tourism sector this successful transaction highlights the level of demand for well located hospitality assets that can easily pivot to the staycation market”.

Article by The Irish Times

Quintain’s €500m investment in Adamstown gets under way

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Irish housebuilder Quintain has turned the sod on its €500 million urban hub investment in Adamstown, west Dublin, commencing construction on a 279-unit apartment development aimed at the build-to-rent market. UK grocer Tesco has also signed up as an anchor tenant at the development.

Called The Crossings, Quintain’s first phase of development at the new urban centre in Adamstown will include 279 apartments and more than 91,000sq ft/8,500sq m of space to house two major supermarkets, 20 retail units and five restaurant outlets, along with a multi-storey car park.

Quintain is the housebuilding unit of US private equity giant Lone Star, which has accumulated a massive Irish landbank.

Construction of the apartments has a completion date of mid-2023. Planning permission for a second phase of 185 apartments has been granted and further phases are planned for submission in late 2021 and early 2022.

Quintain has a buyer lined up for the first tranche of its buy-to-rent scheme but Eddie Byrne, joint managing partner with the developer, says “it’s too early to say who it is”.

New urban centre

Getting this forward funding is key to the construction of such a developments, he says. “You really need to be able to have a buyer lined up in advance.” The Crossings will form an integral part of a new urban centre at Adamstown, which, over the next four to five years, will see the construction by Quintain of almost 1,000 residential units, mostly apartments/duplexes, with a “very small number of houses”.

On the retail side, Tesco has signed a lease for a 40,000sq ft/3,700sq m store, which is set to open in January 2023, with a second leading supermarket anchor store set to open a

Bannon has been retained as agents for the leasing of the retail units, which will serve an estimated potential shopping population of more than 100,000 people drawn from Adamstown, and the neighbouring suburbs of Lucan, Celbridge and Leixlip.t the same time.

To date, Quintain and its affiliates have built 1,000 homes in Adamstown, with over 85 per cent occupied by first-time buyers, launching developments such as Tandy’s Lane and Somerton.

Earlier this year it received planning permission to construct 235 new homes at Aderrig in Adamstown, to include 159 houses and 76 apartments. The scale of its total investment in the area is expected to be north of about €3 billion.

Green open space

In June, Quintain completed and transferred ownership to South Dublin County Council of Tandy’s Lane Park, which will provide local residents with easy access to green open space. Another 27-acre green open space – Airlie Park – is set to open by the end of the year and will include a cricket pitch and Astroturf pitches, while a two-acre village green will provide a centre piece for The Crossings development.

Michael Hynes, joint managing partner with Quintain Ireland, said, “This investment will contribute to the social fabric of the area, and is supported by the handover of Tandy’s Lane Park to South Dublin County Council. We are very confident in the strong level of demand there is to live in the area, which will be boosted by the new amenities we are delivering.”

Quintain owns 220 acres in the Adamstown/Lucan area, where it plans to develop up to 5,000 new homes and 250,000sq ft of commercial space. The company’s broader land portfolio covers 460 acres of prime assets in Ireland at Adamstown, Clonburris, Portmarnock, and Cherrywood.

Adamstown was launched in 2005 as Ireland’s first new planned town since Shannon, Co Clare, in the 1960s.

Article by The Irish Times 

Shop Local

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The retail industry in Ireland employs c285,000 people. That is 12.5% of the working population. As leaders in the sector, we are very proud at Bannon to manage over 50 shopping destinations across the country. These destinations are home to over 1,100 businesses who in turn employ 10’s of thousands of local people. Supporting trade locally is supporting your local community. As we reset after COVID, make the right choice, shop local.

Consumers prefer real-life shopping experiences, says leading Irish retailer

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Retail is back and it’s here to stay, says Christine Dolan of Quayside Shopping centre in Sligo Town.

The centre manager believes that the majority of Irish consumers prefer the social experience of a trip to the shops over the convenience of e-tail.

She told the All-Ireland Business Times that Quayside is busier than ever.

“I think people have missed coming into the shops”, she said. “It’s a totally different experience to shopping online.”

“People love the social aspect of a day out shopping and I think most people are sick of the virtual experiences – there are a lot of people who have been quite lonely through the pandemic and you can’t beat meeting up with friends for a lunch date while having a browse through the shops.”

“There’s a great buzz around at the moment and people are starting to mix again and enjoy themselves.”

A 2020 report by Deloitte found that retail is Ireland’s largest industry and the largest private sector employer, employing almost 300,000 workers – with three in four of those employed based outside of Dublin.

Quayside Shopping Centre opened its doors in 2005 as the largest shopping centre in the northwest of Ireland.

With 130,000 feet of floor space the centre boasts 43 retailers including TK Maxx, Lifestyle Sports and Next.

Quayside lost two retailers over the pandemic, one of them was a Carphone Warehouse store which was a casualty of the Group’s decision to close 80 stores in Ireland last year.

Christine revealed that units have since been filled by two new tenants with more set to come on board.

While Christine admits that competing against online retailers will be a tough challenge in the years to come, she is not worried about the long term future of her industry.

“What we’ve proven here time and time again is that we are resilient.”

“We’ve been through a recession and we’ve come out stronger on the other end so I have no doubt that we will get back to where we were pre-pandemic.”

“In fact, I think we’ll be in a better place.”

According to the Central Statistics Office’s Retail Sales Index retail sales increased by 3.3% in June this year compared to May on a seasonally adjusted basis. On an annual basis, retail volumes were 10.6 per cent higher than in June last year.

Interestingly the retail sales figure for June this year was 13.4% higher when compared to two years earlier, before the Covid-19 pandemic.

Quayside Shopping Centre recently landed its third Business All-Star Accreditation in recognition of its contribution to retail in Ireland.

Reacting to the news, Christine said: “I am delighted to be part of an ambitious All-Star Business. To be accredited for the third year in a row is a huge honour and I see it as recognition of the hard work that goes on behind the scenes.”

Quayside’s focus over the next few months is to promote the “shopping centre experience” and Christine revealed that the centre will be introducing an initiative to help local craftspeople and creators.

She said: “We have plans to relaunch our very successful Christmas markets and hope to do this a little bit early this year. The markets provide a wonderful opportunity for local traders who may have been out of work the last while and want the chance to set up a pop up shop or trading stall.”

“We really want to celebrate with our customers and give something back to the local community this year.”

To learn more about Quayside Shopping Centre Sligo, visit their All-Star showcase page here.

Article by All – Ireland Business Times

Hines completes acquisition of final phase at Chatham & King

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International real estate firm Hines has formally acquired the second phase of Chatham & King, a new high-profile mixed-use scheme next to the Gaiety Theatre on South King Street in Dublin city centre.

Hines’s acquisition of the 3,950sq m (42,500sq ft) portfolio marks the culmination of the €165 million deal it agreed with US private equity giant Lone Star for the wider Chatham & King development in 2018. In acquiring the scheme, Hines fended off three rival bids. Two of the competing offers came from German funds, while the third bid came from the billionaire founder of the Zara fashion chain, Amancio Ortega.

In securing ownership of the development, Hines gained immediate control of a mixed-use building with retail units comprising 3,112sq m (33,500sq ft) occupied by Zara, H&M and Warehouse, along with 2,879sq m (31,000sq ft) of overhead office space occupied by data analytics management firm Qualtrics as its European headquarters.

The second phase, which has now been completed by Lone Star, comprises six residential units, five retail units totalling 1,486sq m (16,000sq ft) and 2,461sq m (26,500sq ft) of office space which will be occupied by Qualtrics. The €40 million cost of developing the new building on Chatham Street and Clarendon Row was included as part of the €165 million deal agreed on behalf of Hines European Core Fund (HECF) in 2018.

Negotiations

Hines says that negotiations are at an advanced stage on each of the five new retail units, which range in size from 46sq m (495sq ft) to 1,178sq m (12,680sq ft). The incoming tenants will sit alongside the existing tenants, which include Zara, H&M and Apple-reseller CompuB, which recently signed a new lease for a 315sq m (3,400sq ft) retail unit on South King Street.

The Chatham & King scheme has a prime location next to Grafton Street and St Stephen’s Green, and sits within close proximity to the Westbury Hotel and the new Dublin headquarters of the European Parliament, which is scheduled for completion in November 2023.

Simone Pozzato, managing director and deputy HECF fund manager at Hines, said: “The acquisition of phase two of Chatham & King completes the final element of this portfolio and marks the delivery of an LEED-accredited asset in the Dublin office and retail sector at an opportune time. The property is an excellent fit for HECF given its central location in Dublin, a city which continues to show strong economic growth.

“We are already encouraged by the promising engagements to date from some very exciting retail brands who would be ideally suited to this prestigious shopping district. We hope to have further announcements in this regard in the near future.”

Peter Lynn, director with Hines Ireland, added: “We are delighted to make this timely announcement as Dublin city centre continues to reopen and as Chatham Street itself has recently undergone a significant transformation with Dublin City Council’s pedestrianisation programme. Chatham & King is a high-quality addition to this historic street and our new retail spaces will represent a significant enhancement to the city’s most fashionable shopping district. We are also equally excited to be working with Qualtrics as our lead office occupier as they continue on their growth story.”

Article by The Irish Times

Consumer Sentiment Index

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Irish consumer sentiment is at a two-year high following a modest 1.6% monthly increase in June. This increase brings the index back in line with the 25-year average of the series suggesting sentiment has been normalised. This is further supported by the fact that June marks the fifth successive monthly increase in the index, the first time that has happened since the beginning of 2007. These results suggest that Irish consumers are becoming less concerned about their current circumstances and less fearful about the future which bodes very well the retail sector. Furthermore, trends over the past decade show consumer sentiment as a very accurate leading indicator of retail sales.

Bannon Shopping Centre Footfall (2019, 2020, 2021)

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There is an air of positivity coming from our shopping centre & retail park management teams across the country. It has been great to see the rebound in footfall since full reopening of our portfolio on the 17th of May last. The first three weeks since reopening have seen weekly footfall jump back to 86% of the levels seen in 2019. What’s much more significant is the number of retailers reporting May 2021 sales information (a total of 14 days) being ahead of May 2019 (31 days). There is no question that retailers need to see a sustained period of brisk trade but the data so far is pointing in the right direction.

Retail park portfolio’s €78m sale tests investor appetite

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With online shopping having come into its own following the unwelcome arrival of Covid-19, the sale by New York-headquartered Marathon Asset Management of three of Ireland’s best-known retail parks is set to test the post-pandemic appetite of investors for traditional bricks-and-mortar retail.

The Parks Collection is being offered to the market individually or as one lot by joint agents Cushman & Wakefield and Savills at a guide price of €78 million. The portfolio comprises Belgard Retail Park in Tallaght, Dublin 24, the M1 Retail Park in Drogheda, Co Louth, and Poppyfield Retail Park in Clonmel, Co Tipperary.

While the sale of the entire offers the prospective purchaser the opportunity to secure a collection of strongly-performing retail parks and an attractive net initial yield of 8.43 per cent, the portfolio’s assets are expected to see interest on an individual basis also.

Belgard Retail Park, for its part, is regarded as one of the foremost retail parks in the capital. Located on the Belgard Road in Tallaght and 11km from Dublin city centre, the scheme comes for sale fully-occupied and anchored by B&Q, the largest home improvement and garden centre retailer in the UK and Ireland. Other occupiers include Homestore & More, Dealz, Carpet Right, Halfords, Right Style Furniture, Burger King and Starbucks.

While the scheme currently extends to 12,728sq m (137,000sq ft) with 482 car parking spaces, it has planning permission for an additional retail warehouse unit of 2,404sq m (25,877 sq ft) over two levels with 1,409 sq m (15,166 sq ft) of ground-floor space and 995sq m (10,710sq ft) of retail warehouse/storage space at mezzanine level.

The total current rent is about €3.13 million per annum with a weighted average unexpired lease term of 7.3 years. B&Q contributes around 67 per cent of the income on a lease until 2028 with an upward-only rent review clause.

The M1 Retail Park is located 3km west of Drogheda town centre and just off the M1 motorway connecting Dublin and Belfast. It comprises a mix of retail, office and leisure accommodation extending to a total of 24,805sq m (267,000sq ft), along with 600 car-parking spaces. The majority of the development is taken up by retail and leisure (89 per cent) and is anchored by Woodie’s DIY who occupy 4,885sq m (52,585sq ft). The park’s other tenants include Smyths Toys, Sports Direct /Brand Max, Dealz, Equipet and EZ Living amongst others.

The total current rent is €2.44 million per annum with a weighted average unexpired lease term of 8.4 years. Woodies (with lease guarantees from Grafton Group plc) contributes around 40 per cent of the income on a lease until September 2030 with upward-only rent reviews.

The scheme also includes Mellview House, a four-storey building comprising 25,048sq ft of office space, a 30,483sq ft gym at ground floor, basement and mezzanine levels operated by Gym Plus and a number of other smaller retail units. Another building known as the Pavilion is home to Costa Coffee and TC Matthews with a recent new letting to Lanu Medi Spa.

An additional site adjacent to M1 Retail Park also forms part of the Parks Collection sale. The land extends to 27 acres and comprises three adjoining plots with proposed zoning under the Draft Louth County Development Plan 2021-2027 for three uses, namely ‘A2 New Residential’, ‘ C1 Mixed Use’ and ‘ B4 District Centre’.

99% occupied

Poppyfield Retail Park is located 2.5km from Clonmel town centre at the junction of the Cahir Road and the N24. Developed in 2004, the scheme extends to 12,821sq m (138,000sq ft) and comprises a mix of 14 retail warehousing units, a neighbourhood centre and 393 car-parking spaces. The park is 99 per cent occupied and anchored by Woodie’s DIY (with a lease guarantee from Grafton Group plc) and SuperValu. Other high-profile tenants include Harry Corry, Maxi Zoo, EZ Living, World of Wonder and DID Electrical. The neighbourhood centre is occupied by Costa Coffee, Sam McCauley, along with a hair and beauty studio and fish-and-chips operator. KFC also have a drive-through at the entrance to the park which does not form part of the sale.

The total current rental income is €1.43 million per annum and the weighted average unexpired lease term is seven years. Woodie’s and SuperValu contribute around 52 per cent of the income, and have seven and eight years remaining on their respective leases.

Marathon Asset Management acquired the M1 and Poppyfield parks originally as part of a larger portfolio in 2014, which also included The Park, Carrickmines; Lakepoint Retail Park, Mullingar; and the Four Lakes Retail Park in Carlow. Belgard Retail Park was acquired separately.

Marathon has undertaken significant asset management and phased disposal of these assets since then. The latest sale from its Irish retail portfolio was completed only this week and saw a private high net worth investor paying close to €7 million to secure ownership of Lakepoint Retail Park in Mullingar.

The scheme, which is anchored by Woodie’s DIY, is generating total rent of €516,000 per annum giving the purchaser an initial return of just under 7 per cent. The deal was brokered on Marathon’s behalf by Rod Nowlan of Bannon while Declan Bagnall of Bagnall Doyle McMahon represented the purchaser.

Article by The Irish Times 

Bartra seeks €3.8m for Donegal Boardwalk Resort

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Developer Richard Barrett will be hoping the reopening of the country and the much-anticipated return to growth of the tourism sector will help to drive the sale by his company, Bartra, of the Donegal Boardwalk Resort.

Situated overlooking Sheephaven Bay and at the heart of Ireland’s Wild Atlantic Way, the complex is being offered to the market by agent Bannon with the tourism expertise of Niamh Walsh from TDL Horizons at a guide price of €3.8 million.

The Donegal Boardwalk Resort is a successful trading asset comprising 27 holiday villas arranged across three cul-de-sacs. All 27 units have all been recently upgraded by Bartra and are in turn-key condition, fully fitted and presented to a very high standard. Each villa benefits from a private deck/patio.

The resort also includes a fully-licensed seafront bar, restaurant and function room. The subject property comes with a total of 45 acres, much of which is still undeveloped.

The resort adjoins the spectacular 1km-long boardwalk which links it to Tramore Beach. The renowned four-star Rosapenna Hotel & Golf Resort is a neighbouring property.

The development is located within a short distance of the popular north Donegal tourist villages of Carrigart and Downings and sits just 30km from Letterkenny. It is within a three-hour drive from both Dublin Airport and Galway and a two-hour drive from Belfast.

As the tourism sector begins to reopen this month, the villas are all fully booked for the months of June, July and August and look very promising, according to the selling agent, for the “shoulder season” to follow.

The bar, restaurant and function room building is currently leased. This popular bar and eatery trades as “Hooked” and is a sister operation to the nearby Old Glen Bar and Restaurant.

Paul Doyle of Bannon says: “We are delighted to bring this very special resort to the market on behalf of Bartra. With its location on the Wild Atlantic Way, the resort has become a huge hit for staycations. Donegal Boardwalk Resort has the potential for continued growth by expanding trade further into the increasing shoulder season. There are undeveloped lands within the overall 45 acres which offer further potential, subject to planning permission.”

Niamh Walsh of TDL Horizons commented: “Every angle of the Donegal Boardwalk Resort offers captivating views of the Atlantic coastline and the stunning sights dotted along it. Within a short drive you have the Atlantic Drive, Fanad Lighthouse and Glenveagh National Park. Visitors can experience world-class food in the locality from Fisk Seafood Bar to the Old Glen Bar and Restaurant where Ciaran Sweeney, the former Forest & Marcy head chef, is now heading up the kitchen. The potential is immense.”

Article by The Irish Times 

Neil Bannon on Retail Recovery

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One of the recommendations in our recent report on City Centre retail for Dublin City Council was to improve connectivity between the Retail Core and the Office and Cultural hubs within the City making it easier for City workers and tourists to connect to the shopping areas. Delighted to see the works taking place on Merrion Row and Baggot St which will both improve the pedestrian experience and facilitate on street dining.

Neil Bannon on the Retail Sector

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Dublin Town reporting footfall in the City Centre at 87% of 2019 levels last Saturday, given the lack of Tourists that’s a very encouraging recovery. It will be interesting to see which retailers benefit most from the return of the consumer.

Retail giants poised to land in Dublin

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Retail Giants Poised to Land in Dublin. Neil Bannon commented that “retailers should fill the street by the first half of 2022. We will see Grafton Street pivot away from a UK-dominated high street mix to a more international mix”. Full article available in The Sunday Times.

Bannon Shopping Centre Portfolio – Footfall (2019, 2020, 2021)

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In a normal year we welcome in excess of 100 million people into Bannon managed shopping centres. As is evident from the chart below the last 12 months have been very different. That said we remain hopeful that the end is now in sight and we look forward to seeing the portfolio back to full capacity in the near future.

After the pandemic: in Dublin’s bare city

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After the pandemic: in Dublin’s bare city. Our streets must be reimagined to entice visitors rather than cater to workers. Bannon advises on this in The Sunday Times.

Neil Bannon on the Retail Sector

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The dramatic improvement in the balance sheets of Irish Consumers in the last decade is astounding, savings are up 35% and debt is down 33%, a €70bn nett turnaround. The potential for a positive impact on the retail sector post reopening is clear, the question is where will the money be spent. We are modelling the potential impact on the different retail sub-sectors and expect to see a very different outturn to the 2013 recovery.

Retail parks seize opportunity presented by High Street’s difficulty

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It’s difficult to imagine things getting any worse for the retail sector than they did in 2020. But the chief driving force behind the decline of investor interest began long before Covid-19 arrived. There has been growing concern in relation to the impact of online retail and changing consumer trends on the long-term supply-demand dynamic for the bricks-and-mortar format. Much of this has been imported from the US where retail supply is five times that of Ireland, and the UK where it is 25 per cent higher and undergoing a sustainability crisis.

While the relative performances of these markets may already have been up for debate, the impact of Covid has ended the discussion. By mid-March the sector became virtually un-investable due to Covid-related uncertainties attaching to rental payments being added to those longer-term occupational concerns. The consequence of this is manifest in year-end investment turnover figures where retail will represent a record low 2.5 per cent of an anticipated total investment market turnover of € 3 billion. This from a sector that represented 24 per cent of investment turnover for the last decade (to 2019), but descending rapidly from a high of 53 per cent in 2016 to a previous record low in 2019 of 9 per cent.

Unsurprisingly for 2020 High Street retail has been worst affected with Grafton Street top of the list experiencing a 66 per cent reduction in footfall for March to October. While the street’s footfall figures had been holding steady at 25 million for the last two years, the 2020 outcome will be closer to 13 million.

No surprise then that almost a quarter of the units on the street are effectively available. Henry Street performed a little better as did some of the other city’s high streets, but the tone is similar. Next in line were the “comparison led” shopping centres which, as a general rule, saw footfall collapse during the first lockdown and rent collections plummet below 35 per cent. However, they did improve quickly and were less affected by the second lockdown. The burden of the service charge costs of running these mall-based schemes was exposed during these periods and will be a key factor in assessing the risk of ownership of these asset types in the future.

The resilience of the grocery sector shone through. No surprise therefore that 65 per cent of the limited 2020 retail investment transactions were grocery deals. Similarly, smaller grocery-led schemes performed better and recovered quicker than major town centres but weaker covenant strength and holding costs affected net rental collections.

Low holding costs
The retail sector’s star performers, however, have been the retail parks. Indeed, in the case of the 15 retail parks under Bannon management (between nationwide lockdowns) car throughput actually increased year on year for the period with rent collection rates approaching 100 per cent and impressive turnover increases. Even where tenants were adversely affected, low holding costs relative to shopping centres maximised the net income return to landlords.

If this crisis has accelerated the sector’s movement to the “retail endgame”, then retail parks and their occupiers have risen to the challenge. In this regard we envisage this asset type, along with grocery, to be the most liquid and popular sector for the year ahead.

Outside of this and following both Brexit and an anticipated mid-January lockdown we foresee a post-vaccine period of rebuilding balance sheets and filling occupational voids. While this period could take 12 to 24 months, there is little doubt that the rebasing of the sector generally will attract new investors wishing to get ahead of the recovery. This will probably manifest as loan trades first with a focus on fundamentally-sustainable schemes and high streets at attractive yields with occupiers who have embraced the omnichannel experience.

More sophisticated investors will recognise the buying opportunity that Covid-19 presents, especially if valuers fail to acknowledge the vast differences in performance across the sector.

Rod Nowlan is investment director at Bannon

Article by The Irish Times

Shopping Centre Portfolio – Footfall

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In general the footfall across our portfolio is remarkably consistent every year, however 2020 is very different. We remain hopeful that people will shop with purpose when the restrictions are eased at the start of December.
Businesses across the country need a strong finish to the year and we can all help to make it happen.

Harvey Norman much-anticipated arrival into Sligo Retail Park is finally here

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Harvey Norman has just opened their brand new 45,000 sq. ft store in Sligo Retail Park on Thursday, 5th November. It is Harvey Norman’s first store in County Sligo and the 16th store in Ireland. The store is opening under the Government guidelines on a restricted basis due to level 5 lockdown with only essential goods and click and collect available.

It is also the fifth Harvey Norman store in Sigma Retail Partners’ portfolio, with other Harvey Norman stores in Naas Retail Park, Drogheda Retail Park, Waterford Retail Park and Gateway Shopping Park.

With over 290 stores worldwide and currently 16 in the Republic of Ireland, Harvey Norman is the leading retailer of furniture, bedding, computer and electrical goods. The first Harvey Norman store opened in Swords in Dublin in August 2003. Its stores have over 750,000 square feet of retail space and boast a massive range of goods. Harvey Norman has a worldwide presence with stores in eight countries across the globe, including Singapore, Malaysia, Slovenia, New Zealand, Croatia and of course Ireland.

Paddy O’Connor, Asset Manager from Sigma Retail Partners, said “We are very pleased that one of the biggest and most well-known global retailers in household and electrical goods has joined Sligo Retail Park. It is the completion of a lengthy asset management strategy with a focus to bring Harvey Norman to Sligo and the wider North West catchment. We are very confident that Harvey Norman will perform extremely well in Sligo and they are a great addition to our other fantastic retail partners in Sligo Retail Park.”

Sligo Retail Park is the primary retail park destination in the North West catchment area with stores catering to a wide variety of customers and accommodates diverse retail use. It has a total of 14 retailers that include JYSK, Currys PC World, Smyths Toys, Homebase, Castle Davitt, Right Price Tiles, Homestore & More, EZ Living, McDonalds, Costa and KFC, with 1,000 free car parking spaces.

Article by Sigma Retail Partners 

VIEW LETTING BROCHURE

Neil Bannon on the Imposition of Essential Goods

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The inconsistent and illogical nature of the imposition of essential goods only sales in retail across the country is causing serious damage to the sector.

We have reports from across the portfolio of local Jewellers who are operating on a Click & Collect basis being told to pull their shutter, a news agency being advised that can sell cigarettes and lotto tickets but not books or magazines, a florist being told to close who traded during the last (and more severe) lockdown.

The government needs to think about where this spend will go. A customer told they cannot buy a magazine or a book in a shop that is already open is one click away from redirecting spend from a small local business to Jeff Bezos

Neil Bannon – September Retail Sales

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September Retail Sales indicate that at least one part of the economy is definitely experiencing a K shaped recovery. The stellar numbers that continue to come out of the DIY sector (YOY: Hardware +27.6% YOY, Electrical +21.1% & Furniture +11.9%) contrast sharply with Bars which are predictably down 48%.

What’s interesting is that total value of retail sales was up 7.2% year on year which means Irish consumers spent a lot more this September than last year.

This was all before the lockdowns started again which if recent experience is anything to go by will exacerbate the K shaped nature of the market performance.

Neil Bannon – Retail Sales

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As per the Retail Sales figures released by the CSO and our own experience across our retail park portfolio DIY & Household goods sales have been the stand out performer of the Retail sector since March.

Retail Parks continue to perform well with rolling restrictions on other retail outlets redirecting spend into home improvements.

Interestingly this is a sector with very low levels on pure online penetration although we have been actively engaging with a number of occupiers about facilitating their client and collect offer.

Owners of vacant properties beware!

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Since the introduction of the Local Government Reform Act 2014, Local Authorities have been given autonomy to vary the level of rates relief granted to owners of vacant properties. As a result, the level of refunds on commercial rates available to Landlords of vacant properties varies significantly between Local Authorities. In Dublin City Council for example the owner of a vacant property is responsible for 75% of the annual rates bill (with 25% relief granted by DCC) where a property remains vacant and unlet.

Local Authority Vacancy Relief 2020
Dublin City Council 25%
Dun Laoghaire Rathdown County Council 35%
Fingal County Council 50%
South Dublin County Council 50%

These levels of vacancy relief will come under increased scrutiny later in the year as Council’s prepare Budgets for 2021 and beyond. Owners of unoccupied properties should carefully consider options on how to mitigate against increased vacancy voids.

Niall Brereton

How much do our Local Authorities rely upon retail rates?

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Businesses across Ireland contribute approximately €1.5 billion in commercial rates to Local Authorities across the country each year. This is a critical source of income for each of the 31 Local Authorities in the State and typically accounts for between 16% and 53% of their revenue stream with the national average standing at 33%. According to the latest available statistics collection rates averaged 86% nationwide in 2017, significantly less that the corresponding LPT collection rate which stood at 97%.

Within the Dublin City Council administrative area commercial rates income of €353.5m has been budgeted for the 2020 financial year. Of the 21,000 commercial properties within the city it is estimated that some 34% are classified as retail properties following the last Revaluation process. Therefore, the total annual rates income from retail properties alone in Dublin City is in the order of €120m, representing almost 12% of the Council’s total annual revenue for 2020.

The reliance on rates income from retail properties is even more pronounced in Dun Laoghaire-Rathdown which is home to the country’s largest retail scheme. Dundrum Town Centre alone contributes €9.2m in annual rates income representing just over 10% of the Council’s budgeted rates income for 2020.

In the midst of the current Coronavirus pandemic most businesses, particularly those considered non-essential and which have been forced to shut their doors, are intensively considering cash-flow and how to eventually get their businesses re-open for trade, if at all. It’s likely that overheads such as wages, rent and payments to Revenue will take precedence over commercial rates.

For its part the Government has recognized that ratepayers, particularly small and medium retailers, hospitality, leisure and childcare operators are likely to be the businesses that are most adversely affected. However, they have stopped short of issuing an exemption from commercial rates unlike the U.K Government which announced that all retail and hospitality firms will be exempt from business rates for 12 months. In the absence of such tangible Government intervention on the issue Local Authorities will be facing major funding difficulties and hard choices over which of their services to cut as additional revenue raising measures will not be palatable.

Niall Brereton

Household Finance and Consumption Survey (HFCS) 2018

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The Central Statistics Office has today issued results from the Household Finance and Consumption Survey (HFCS) for 2018 and comparable data for 2013, the previous year this survey was run.

Commenting on the report, Stephen Lee, Statistician, said: “The HFCS is the only household survey that collects combined information on asset, income and debt levels of Irish households.

The results show that in Ireland, the wealthiest 10% of all households have a net wealth greater than €835,000 while the bottom 10% have a net wealth of less than €1,000. Net wealth is calculated as the value of all assets minus debt.

In 2018, the median net wealth value of Irish households was €184,900, representing an increase of 80.2% on the 2013 value of €102,600.

The median value is obtained by arranging all households in ascending order from the smallest to the largest value and then selecting the middle value. In terms of wealth, the median provides a truer reflection of the average household as it is not influenced by extreme values.

The value of the household’s main residence is a key component of wealth. In Ireland, 69.5% of households own their own residence. In 2018, the median value for households’ main residence was €250,000, up from €150,000 in 2013.

The median net wealth of households that own their own home is €287,300 while for renters it is considerably less at €5,900.

We see that wealth is more concentrated in the ‘Eastern and Midlands’ region with a median net wealth of €212,700, compared to €189,700 in the ‘Southern’ region and €146,900 in the ‘Northern and Western’ region.

Almost one third of households (32.7%) reported that they received an inheritance or a substantial gift at some time in the past. However, this varies depending on how wealthy a household is. Over two thirds (67.6%) of the wealthiest 10% of households received a substantial inheritance or gift but this drops to just over one tenth (10.3%) for the 10% of households with the lowest net wealth.

More than nine out of every ten households (94.3%) own some form of financial asset including savings, shares, bonds, investments and voluntary pensions. For households that own financial assets the median value is €7,900 up from €6,300 in 2013.

Over half (51.5%) of all households have some form of debt including mortgages, loans, credit cards and overdrafts, down from 56.8% in 2013. Overall, the median value of debt, for those households that have debt, has dropped by over €20,000 since 2013, from €63,000 to €42,300.

For households that have a mortgage on their home, the median loan to value (ltv), the ratio of the outstanding amount of the mortgage to the current value of the property, is 45.3%, down from 73.5% in 2013.

In 2013, 31.9% of all homes owned with a mortgage were in negative equity, whereas the 2018 rate is 3.9%.”

CSO Published Article

Retail Sales volume increased by 3.6% in December 2019

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The volume of retail sales increased by 3.6% in December when compared to November on a seasonally adjusted basis and increased by 5.8% on an annual basis.

Note: ‘Black Friday’ is included in the December reporting period for the RSI, which covers the 5 weeks 24/11/2019 – 28/12/2019. In 2018 ‘Black Friday’ was covered in the November reporting period.

When Motor Trades are excluded, the volume of retail sales increased by 2.8% in December 2019 and rose by 5.0% when compared with December 2018.

The sectors with the largest month on month volume increases were Food, Beverages & Tobacco (11.7%) and Motor Trades (5.3%).  The sectors with the largest monthly volume decreases were Other Retail Sales (-10.0%) and Books, Newspapers & Stationery (-3.0%).

There was an increase of 3.4% in the value of retail sales in December 2019 when compared with November 2019 and there was an annual increase of 4.6% when compared with December 2018. If Motor Trades are excluded, there was an increase of 2.9% in the value of retail sales in the month and an increase of 3.0% in the annual figure.

Unadjusted indices are available on CSO Statbank.

Online Sales

The sector with the highest share of its sales online in December 2019 was Online & Mail Order at 87.5%. This sector accounted for 1.0% of turnover in the 2017 Annual Services Inquiry. For Electrical Goods the online share was 13% and for Clothing, Footwear & Textiles it was 7.3%.

Published Article

Davy upgrades GDP growth forecast for 2020 to 5.5%

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Stockbrokers Davy have revised upwards their GDP growth forecast for 2020 to 5.5% from 4.1% previously.

Davy said the upgrade came on the back of strong foreign direct investment, expansion in the multinational sector and an exceptional export performance.

The new forecasts puts Davy well above official projections including the Central Bank’s estimate of 4.3% and the Department of Finance’s forecast of 3.9%.

The stockbrokers also revised upwards their forecast for Irish GDP growth in 2019 to 6.2% from 5% previously.

In its latest Irish Economist forecast, Davy said that exports are set to grow by 11% in 2019 and 7% in 2020, due to continued strong foreign direct investment levels.

Davy also said it expects consumer spending to grow by 3.2% in 2020 and employment by 2.5%, with the unemployment rate falling to 4.4% and the Budget surplus growing to 0.8% of GDP.

On Brexit, Davy said that the UK’s planned departure from the European Union uncertainty depressed the Irish indigenous economy in 2019.

The stockbrokers noted that about 50% of SMEs postponed investment plans and the pick-up in liquidity in the housing market was delayed.

It also said that non-residential construction slowed sharply last year, with output in the distribution, transport and tourism sectors flat on the year.

“Now that a no-deal Brexit cannot occur in 2020, we expect output in indigenous sectors to grow by 3.5% in 2020, slightly faster than the 3% in 2019,” Davy said.

It also said it expected house price inflation to rise slightly to 2% during 2020 from 1% in 2019.

Published Article

Economic growth set to continue in 2020 but at a reduced rate

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The Irish economy looks set to register strong growth again in 2019 with GDP likely to increase by almost 6 per cent in the current year. While certain multi-national related transactions are distorting the headline figures, the large increase in taxation receipts and the continued strong performance of the Irish labour market means the underlying economy is performing well.

The persistent growth of the Irish economy is remarkable given the strong headwinds observed in 2019, the uncertainty about the Brexit process, and the moderation observed in global conditions, all of which are likely to have had a negative impact on the domestic economy. The Brexit process has merely been parked, with the possibility of a free trade agreement being negotiated between the UK and the EU in 2020. This will almost certainly result in further uncertainty in the years ahead. We expect to see the economy grow by a slower rate in 2020 of 3.3 per cent.

Another potential challenge for the Irish economy is the issue of corporation tax receipts, which are becoming an increasingly large share of the total tax receipts of the Irish exchequer. They now account for over 18 per cent of total tax receipts and there is concern that a portion of these receipts may be windfall revenues, which are not sustainable. ESRI economist Petros Varthalitis examines the implications for key fiscal metrics if there was a sudden reduction in the amount of corporation tax receipts available. It would likely require significant measures to be adopted by the Government in order to maintain fiscal discipline. The results underpin the need to quantify the potential windfall component of these receipts. They are also important given the recent proposals by the OECD for corporation tax policy.

The Commentary also examines the regional diversity of the Irish property market performance over the last 10 years. ESRI economists Matthew Allen-Coghlan and Kieran McQuinn note that both prices and rents have grown at significantly different rates in different areas of the country during this period. Areas of the country that had relatively high prices and rents initially experienced the fastest pace of growth subsequently. This suggests that different regions of the country have experienced varying economic growth rates over the past 10 years.

ESRI reports

Top 10 commercial property megadeals in 2019

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When the total volume of investment in Ireland’s commercial property market hit a record €4.6 billion in 2014, any expectations of that figure being surpassed anytime soon were few and far between.

Just five years on, however, the consensus within the industry is that a new benchmark of around €5 billion will be set. While the number is eyewatering in and of itself, it is all the more extraordinary when one considers the various domestic and international factors that have served at different times during the year to give local and international investors pause for thought.

Here at home, Minister for Finance Paschal Donohoe’s Budget 2020 stamp duty hike and Reit policy changes served to shake investor confidence, while on the global stage, the known unknowns of Donald Trump’s US presidency and the UK’s self-flagellation over Brexit, weighed heavily on buyers and vendors alike.

But with international funds still looking for a long-term home in an era of record low bond yields and interest rates, Ireland and more particularly Dublin’s standing as a location to deploy capital came into its own, as the top 10 deals below illustrate.

1 The Green Reit portfolio, Dublin – €1.34 billion

The largest deal of the year and the largest direct asset sale ever in the Irish market has served to propel this year’s record investment spend to the €5 billion mark. Having assembled a portfolio comprising Horizon Logistics Park and prime Dublin offices such as One Molesworth Street and the Central Park campus in Sandyford under founders Pat Gunne and Stephen Vernon, Green Reit surrendered its stock market listing last month following the acquisition for €1.34 billion of its assets by UK-headquartered, Henderson Park Capital.

2 The “XVI” portfolio, Dublin & Cork – €285 million

In July, the Competition and Consumer Protection Commission (CCPC) cleared the way for Ires Reit’s €285 million purchase of the 815 homes in the “XVI” (16) portfolio from US private equity giant, Marathon Asset Management. Distributed across 16 high-end developments in Dublin and Cork, the portfolio largely comprises the 588 apartments for which Marathon paid Nama € 120 million in 2015 as part of the Project Plum loan sale process. Included in the Plum portfolio’s prime assets were 101 apartments at Beechwood Court in Stillorgan, 67 units at Time Place on Corrig Road in Sandyford, 39 apartments at Heywood Court at Northwood in Santry and 128 apartments at Northern Cross on the Malahide Road.

3 The Sorting Office, Dublin docklands – €240 million

In June, Pat Crean’s Marlet Property Group and its finance partner, M&G Investments, secured a significant return from the sale of the Sorting Office to Singapore-headquartered real estate investment trust, Mapletree. Located on a site in the Dublin docklands which Marlet and M&G acquired from An Post for €40 million in 2015, the 19,510 sq.m (210,000 sq.ft) office scheme represented Mapletree’s first acquisition in Ireland. Google is currently in talks to rent the development in its entirety to facilitate the expansion of its Dublin-based workforce.

4 Heuston South Quarter (HSQ), Kilmainham, Dublin 8 – €222 million

While Henderson Park Capital hit the headlines in a big way this year with its purchase of Green Reit, it made its first foray into the Irish market last May when it teamed up with developer Joe O’Reilly to acquire the landmark Heuston South Quarter (HSQ) in Dublin city centre from US property giant Marathon Asset Management for €222 million.

Widely acknowledged as one of the foremost mixed-use campuses in the capital, the HSQ scheme comprises 266 apartments, 9,877 sq.m (106,319 sq.ft) of Grade A office space, 4,463 sq.m (48,034 sq.ft) of commercial space, and a 1.47 hectare (3.63 acre) development site.

The price paid by Henderson Park represented a premium of 85 per cent on the €120 million HSQ’s former owners, Marathon, paid Lloyds Banking Group to acquire the loans associated with the scheme in 2014.

5 Four and Five Dublin Landings, Dublin docklands – €205 million

The success of Ballymore and Oxley’s Dublin Landings mixed-use scheme continued apace this year with the sale of blocks 4 and 5 at the sprawling docklands development to the Central Bank of Ireland for €98.6 million and €106.5 million respectively. Located next to the Central Bank’s existing headquarters on North Wall Quay, the blocks extend to a combined floor area of 200,000 sq.ft (18,850 sq.m), and will be used to accommodate the expansion of its existing 1,815-strong workforce by up to 300 employees.

6 Five Hanover Quay, Dublin docklands – €190 million

Targeted Investment Opportunities ICAV (a joint venture between funds managed by Oaktree Capital, Bennett Group and Nama) didn’t have to wait long to find a buyer for Five Hanover Quay. Having put the fully-let prime Dublin docklands office building on the market last May, they agreed its sale for “just over” €190 million to German-based fund manager, Union Investment, in August. The property, which comprises 14,864 sq.m of office space distributed across seven floors, is let to various tenants including technology company DocuSign and Aptiv, a global auto parts company.

7 Nova Atria, Sandyford – €167 million

With the ink barely dry on its €240 million purchase of the Sorting Office, Singapore-headquartered Mapletree hit the acquisition trail again, snapping up the Nova Atria office campus at Sandyford in south Dublin from US private equity firm, Blackstone, for €167 million. The closure of the deal in October brings Mapletree’s investment to date in the Irish office market to €407 million.

Nova Atria comprises two office blocks comprising a total of 320,000 sq.ft known as Nova Atria North and South. Nova Atria North is let to a number of tenants while all 15,939 sq.m (172,121 sq.ft) of space at Nova Atria South was let to Facebook by the scheme’s previous owners, Blackstone, earlier this year.

8 Reflector Building, Dublin docklands – €155 million

While several parties including German asset manager, Wealthcore, and South Korean bank holding company, Hana Financial Group, were linked to its purchase since it was brought to the market last February, another German investor, Deka Immobolien, came through to acquire the Reflector Building for €155 million.

Completed by Michael Cotter’s Park Developments in 2018, the Reflector is a six-storey over-basement building comprising 11,250 sq.m of office space and 329 sq.m of retail space, with 34 car-parking spaces. The property is producing annual rental income of around € 7 million from several tenants, including Airbnb, LogMeIn and web designer Wix.

9 Charlemont Exchange, Dublin city centre – €145 million

Developer Pat Crean’s Marlet Property Group landed the first major commercial real estate deal of 2019, when it completed the sale last April of its Charlemont Exchange office scheme to South Korean-based fund, Vestas Management for €145 million.

Marlet assembled the Charlemont Exchange development originally through the acquisition of Charlemont Blocks A, B and C in March 2017, followed by the purchase in December 2017 of Charlemont Block D. Marlet subsequently extended the combined footprint of the four-building scheme from its original 94,968 sq.ft to 121,270 sq.ft in the course of refurbishing the scheme.

Prior to selling the development, Marlet agreed a lease with flexible workspace provider, WeWork, for all four blocks at a rent of €55 per square foot.

10 DIT Kevin Street campus, Dublin 2 – €140 million

Developer Shane Whelan’s Westridge Real Estate signalled its intention to become a major player in the Dublin commercial property market last September when it paid €140 million to acquire DIT’s former Kevin Street campus.

Whelan’s acquisition of the 3.57-acre site represented the biggest development land deal of 2019, and was backed by a number of New York-based high net worth family offices. Debt finance for the deal was provided by Fairfield Real Estate Finance led by Chris Wilson and BentallGreenOak which was led by its Dublin-born vice-president Allen Crampton.

Westridge is in the process of preparing a planning application for a major mixed-use scheme comprising mainly Grade A office space alongside a large element of private rented sector (PRS) apartments, and food and beverage offerings. The former DIT campus is located just 300m from the Luas Green Line stop at St Stephen’s Green, and within walking distance of the city centre.

€100 million mark

Outside of the top 10 deals by value, numerous other transactions during the year eclipsed or at least equalled the €100 million mark. In the hotel sector alone, both the Marker and the Conrad changed hands for €134 million and €116 million respectively. Henley Bartra, a joint venture between UK private equity giant Henley and developer Richard Barrett’s Bartra Capital, meanwhile paid €125 million for 500,000 sq.ft of offices and data centre assets distributed across the Citywest Business Campus in Dublin and Cork Airport Business Park.

The fast-growing private rented sector (PRS) market was a hive of activity with notable deals including the sale to DWS for €108 million of 214 apartments at the Cosgrave Property Group’s Fairways scheme in Dún Laoghaire, and the sale to Patrizia of 179 apartments at Marlet’s Mount Argus scheme in Harold’s Cross for €100 million.

Among the deals understood to have been agreed but not yet finalised are Starwood’s sale for €535 million plus of five prime Dublin office properties, known collectively as the Cedar portfolio to US private equity giant Blackstone; Tristan Capital Partners’ sale for €214 million of the 382 apartments in the Vert PRS platform to Avestus Capital Partners, and the €185 million acquisition by a fund managed by Davy Real Estate of St Stephen’s Green shopping centre.

Published Article

Society of Chartered Surveyors - SCSI Ireland

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