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.
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. 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.
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. Our streets must be reimagined to entice visitors rather than cater to workers. Bannon advises on this in The Sunday Times.
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.
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
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 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.
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
