Our latest monthly Retail Pulse has now gone live. In this publication our retail leasing team recap on activity at the half year point of the year. Separately in our “Expert Insight” section Neil Bannon looks at two differing perspectives relating to the performance of instore vs online retail. The devil is always in the detail!
To view the full report, please click here.
The development of infrastructural schemes of national importance has long been problematic. Inherently such schemes require the compulsory acquisition of multiple landholdings and as a result many road and light rail schemes have been beset with legal challenges resulting in delayed delivery and in some circumstances the complete abandonment of projects.
There have been numerous examples of schemes that have failed to materialise due to legal challenges which cast aside the merit of the scheme itself. These include the Galway City Outer Bypass which was granted approval by An Bord Pleanála in November 2008, however following a Judicial Review to the High Court and ultimately to the Court of Justice of the European Union (CJEU) the scheme was quashed in 2013. The latest iteration for a relief road around the City (N6 Galway City Ring Road) received approval from An Bord Pleanála in December 2021. Three sets of legal proceedings were taken challenging this decision. This resulted in the High Court remitting the scheme back to An Bord Pleanála for further consideration after the Bord was found to have failed to take into account the national Climate Action Plan. The scheme was then formally quashed by the High Court in early 2023.
The proposed Foynes to Limerick Road (incorporating a bypass of Adare) was approved by An Bord Pleanála in August 2022. It too was the subject of three sets of Judicial Review proceedings which resulted in the scheme being halted. It has recently been reported that those Judicial Review proceedings have been withdrawn however progress on the scheme has been delayed for the best part of a year.
The delivery of critical infrastructure which involve CPO powers should rightly be the subject of scrutiny, however, at present it appears that major infrastructural schemes are ‘open season’ for objectors whether they are directly impacted or not. If important infrastructural projects are to be delivered in a timely manner then our view is that the process of seeking consent to allow the scheme progress to construction requires material reform to ensure that the public good trumps individual objections.
Niall Brereton is Director of Professional Services at Bannon and advises Landowners in respect of Compulsory Purchase Orders across a range of infrastructural projects.
24th July 2023
The Bannon team took part in the Nexus 5-aside Tag Rugby Tournament held by the SCSI – Society of Chartered Surveyors Ireland yesterday evening and ended up being semi-finalists!
It was great to see so many companies across the industry battling it out.
We are already looking forward to the next game🏉
Iain McGann, Dwane Martin, Jamie Brindley, David Munro, Daniel Murphy, Roderick Nowlan, Emer Kelleher, Julia Halpenny, Edward Williams, George Colyer
Lily is showing her support to the Girls in Green at the FIFA Women’s World Cup today in Australia, the Bannon team wish you the very best of luck and have no doubt you will do us proud! 🏆🍀⚽
The second quarter proved to be a challenging period for the Irish capital markets sector, with a total value of only €333 million invested. This marks the weakest performing quarter (and half year at sub €1 billion) in the last six years.
This lacklustre landscape can be attributed to three key factors: the end of “free money” as interest rates rise and inflation runs rife, the post-Covid impact of remote and hybrid working on office space demand, and concerns surrounding necessary capital expenditures for ESG (environmental, social and governance) retrofitting amidst rising construction costs.
However, after years in purgatory, it is the retail sector that has emerged as the star performer this quarter, accounting for 38.7 per cent of turnover. Although this performance is partly supported by the downturn in other sectors, there is no doubt that a significant perception shift has occurred, particularly in the retail park segment.
Notably, six retail parks have traded this quarter alone amounting to approximately €116 million including Liffey Valley B&Q, City East, Blackwater, Carlow, Newbridge and Waterford.
The most high-profile of these, Liffey Valley B&Q, which traded to French fund Inter-Gestion REIM for €26.6m, has thrown off a particularly strong equivalent yield in the mid to late 5 per cent range for an asset with a lease that has less than four years to run. This process saw participants such as Realty, Corum and Iroko compete for the asset.
So, what has driven this remarkable change in fortunes?
The “newfound” popularity of the retail sector can be attributed to a slow but building appreciation for what have been long-standing dynamics in both the supply and demand side of the sector. These dynamics differ considerably from the UK and US markets, where Irish retail investor sentiment used to originate.
Unsurprisingly, that core of the demand has shifted to both domestic family offices and a more central European focus where an appreciation for the fundamentals has shown through.
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Since 2011, when the last new shopping centre was completed in Ireland, there has been minimal net additional retail supply. This stands in stark contrast to the substantial expansion witnessed in the office, residential, and industrial sectors.
However, during this period, the number of people employed in Ireland has surged by 37 per cent, retail sales volumes have increased by 38 per cent, and Irish households’ net worth has reached new heights. These are all factors which feed the fundamental sustainability of the retail sector.
When considering the cumulative impact of debt reduction, increased savings, and rising house prices, Irish households are wealthier than ever before, with a net worth surpassing €1 trillion for the first time.
This surpasses the 2007 peak level of €716 billion, which was actually exceeded in the final quarter of 2017. Furthermore, Ireland’s gross debt-to-household income ratio has transitioned from over 200 per cent of the European average in 2011 to being below that European average today.
Combining these fundamentals with the historical correlation between inflation and the growth of retail rents and values, the renewed interest in the sector becomes apparent.
As highlighted by the turnover statistics, retail parks, in particular offer a compelling proposition. They benefit disproportionately from household growth and have proven resilient during economic downturns and the challenges posed by Covid-19.
Additionally, their ability to meet ESG requirements through initiatives like PV panels, rainwater collection, and other environmental measures adds value and attracts investors including new entrants. Similar attributes for high-street properties and grocery-led necessity retail are likely to see further interest in these sectors.
We expect to see numerous quality high-street trades in the third quarter and generally as the environmental benefits of the “centralised-distribution model” reflected by retail warehouses, shopping centres and Ireland’s key high streets becomes apparent.
We are seeing a complete return to pre-Covid footfalls for most the of the regional and necessity-focused schemes with Dublin’s two high streets hitting pre-Covid weekly footfall levels again for the first time last month.
As a consequence, we expect the sector to continue to outperform for the coming quarters with no less than seven shopping centres amounting to over €100 million in value due to trade within the next few weeks.
Rod Nowlan is an executive director at Bannon and heads up its office and capital markets team
What a fantastic team building day out in Kilkenny with the Bannon team on Friday.
A huge thank you to our social committee for organising such a great event!
The retail sector in Ireland is preparing for the country’s new Deposit Return Scheme (DRS). Starting from February 1, 2024, consumers will be required to pay a small deposit (15c/25c) on plastic and aluminium beverage containers, which they can reclaim by returning the empty containers to designated collection points.
The DRS represents a substantial step toward achieving a more sustainable future. In line with the Single Use Plastics Directive, Ireland must ensure the separate collection of 77% of plastic beverage bottles placed on the market by 2025, with a further increase to 90% by 2029.
Many of the collection points will be located in shopping centres. While the primary objective of this scheme is to reduce plastic waste and encourage recycling, shopping centres will experience notable impacts on their operations and customer behaviours. One immediate consequence of the DRS will be the need for shopping centres to accommodate the significant increase in the volume of recycling. To effectively handle this increase, shopping centres will need to assess their existing infrastructure and make necessary adjustments. Proper management and maintenance of these areas in collaboration with recycling partners will be crucial to ensure a smooth and streamlined process.
With just over six months remaining until the implementation of the DRS, the Bannon Property Management Team is observing larger retailers in the firm’s shopping centre portfolio making preparations for in-store returns. While these changes may require initial investments and adjustments, the implementation of the DRS is likely to bring about positive changes in consumer behaviour, including increased footfall. The introduction of the DRS creates an added incentive for consumers to visit shopping centres. This increased footfall can translate into higher customer traffic, benefiting not only the recycling depots but also other retailers within the shopping centre.
By embracing this transition, shopping centre owners can demonstrate their commitment to environmental responsibility, attract socially conscious customers, and contribute to a greener future.
With over 25% of Ireland’s shopping centres under Bannon’s management, the firm is highly focused on implementing best practices that promote sustainability and reduce environmental impact while enhancing the customer user experience. If you would like more information about the DRS or discuss implementing sustainable practices in your properties, contact the Bannon Property Management Team today.
Author: Alex Patterson, Director, Bannon
Date: 13th July 2023
The Government has been grappling with a housing shortage for several years. As the demand for housing continues to outstrip supply, creative solutions are needed to address this pressing issue.
One potential solution that is gaining traction is the conversion of office spaces to residential units. This has come to the fore over the last number of weeks as the Government faces unyielding pressure to tackle the accommodation shortfall. Minister for Housing Darragh O’Brien is reportedly considering making planning exemptions to rules which would apply to repurposing office space to housing.
In an article in The Irish Times on May 22nd, it was reported that the Minister has “lobbied his Cabinet colleagues Simon Coveney, the Minister for Enterprise, Trade and Employment, on the issue, seeking his support for a plan that would convert offices built during the recent construction boom but are now underutilised”. The question is, is it feasible to repurpose a recently constructed Dublin office building into residential use?
[ ‘I never imagined such places existed’: What’s it like living in a converted office block? ]
The assumption here is that there is an oversupply of recently built office accommodation in Dublin city centre, but that is simply not the case. Offices built in the boom are in the main environmental, social and governance compliant (ESG-compliant), sustainable buildings. As has been widely reported by many in the property industry, these are and will be the buildings that are in demand for office use. The location of these buildings further enhances their desirability for that use, as we are seeing increased demand for well-located city-centre office buildings due to the availability of employee amenities and unrivalled transport links.
Converting offices into residential units presents an opportunity to address this but there are challenges involved, and as we have seen from other countries, caution is advised for such projects
This movement in the market provides vacant possession to the owner to allow for redevelopment or refurbishment of these brown buildings into ESG-compliant offices or alternative uses. This is where the question of residential conversion is most relevant…residential conversion will be most practical where the office value is lowest and the conversion costs to residential use are more sensible than the cost of “greening” the building for office use. Ultimately, it is about sorting the “wheat from the chaff”.
[ Michael McDowell: Nobody is thinking about the aesthetics of our cities ]
Working with our sister company Evia Sustainability consultants, the Bannon office team is assessing the cost and practicality of bringing older buildings up to standard from a green perspective, and what that entails. If the maths don’t add up – that is, if the cost of greening an office asset exceeds the end value – then the owner is looking at a stranded building which is then a candidate for residential conversion.
Without a doubt, Dublin’s housing shortage necessitates innovative solutions. Converting offices into residential units presents an opportunity to address this but there are challenges involved, and as we have seen from other countries, caution is advised for such projects. Consideration must be given to zoning, building and planning guidelines and regulations. This consideration must relate to the practicality and ability to convert but also to the social factors, with access to amenities, transport, employment opportunities and social connections fundamental for the residents of the schemes and thus their successful transformation.
[ The Irish Times view on turning offices into homes: unlikely to provide a quick solution ]
Embracing this potential solution and implementing it correctly may hold the key to not only helping to solve a housing shortage but also providing options to owners of potentially obsolete office buildings.
Lucy Connolly is divisional director and head of offices at Bannon property consultants
Commercial property management is a dynamic and fast-paced environment. The presence of an estates management team is critical to ensure the smooth and efficient operation of a large portfolio of managed assets. Estates managers perform a wide range of roles across a portfolio and constantly face new challenges daily.
The primary responsibility of the Bannon Estates Management Team is to ensure the safety, security, and smooth operation of Bannon managed property assets. Regular and thorough site inspections serve multiple purposes in achieving objectives. These inspections identify potential safety hazards, ensure compliance with safety regulations, and maintain the overall integrity of the portfolio. By proactively managing safety across the portfolio, the team contributes to reducing accidents and incidents.
Accurate and timely reporting of accidents and incidents is crucial for effective property management. The Bannon Estates Management Team plays a vital role in facilitating such reporting, working closely with on-site centre management teams and contractors. By liaising with relevant stakeholders, such as An Garda Síochána, they contribute to combatting antisocial behaviour and maintaining a safe environment for occupiers and visitors to enjoy.
To ensure the highest quality of service delivery, the team also monitors cleaning standards, security performance, and health and safety audits of the properties. By regularly assessing these aspects, they can identify deficiencies and take appropriate corrective actions. This helps to maintain a pleasant user experience for occupiers and visitors while mitigating potential risks.
Monthly KPIs
The team sets monthly KPIs to track performance, identify areas for improvement, and recognize exceptional service delivery. Regular discussions on KPI results allow for continuous improvement and effective communication with line managers.
Planned Preventative Works
By implementing well-structured planned preventative maintenance programs, the team ensures that potential issues are addressed proactively, reducing the likelihood of unexpected failures, and minimising operational disruptions.
Crisis Management
Dealing with unforeseen events such as fires, floods, and anti-social behaviour requires efficient crisis management. The Bannon Estates Management Team plays a vital role in formulating and fine-tuning response plans, enabling prompt action to mitigate risks and minimise the impact on property stakeholders.
By conducting thorough site inspections, managing safety, maintaining standards, and overseeing crisis management, the estate management team contributes significantly to the success and reputation of the properties Bannon manages. With effective collaboration, strategic planning, and a proactive approach, the team creates a safe and pleasant user experience for occupiers, visitors, and the wider community.
Author: Stephen McCoy, Estates Manager, Bannon
Author: Kennan Daly, Graduate Surveyor, Bannon
Date: 7th July 2023
Following a subdued Q1, Dublin office take up for the second quarter of the year reached 440,000 sq.ft. across 57 transactions. This brings the year to date figure to 724,500 sq.ft. Whilst Q2 take up is 53% ahead of Q1 figures, it reflects a H1 decrease of 28% versus the same period last year.
Dublin continues to attract a diverse mix of industries with professional services, finance and State agencies the most active sectors this quarter with TMT lagging behind significantly, accounting for just 6% of total take-up.
