Bannon’s latest monthly Retail Pulse has now gone live.
In this publication, Neil Bannon discusses the concept of a “vibecession” and whether such a term is descriptive of the current Irish economic picture.
To view the full report, please click here.
Shopping centres serve as more than just places to shop; they are social hubs that bring communities together. Among the amenities that enhance the shopping experience, family rooms stand out as vital spaces that promote inclusivity, convenience, and well-being for families. These designated areas cater to the needs of parents and caregivers, offering a range of amenities that make outings with children more manageable and enjoyable.
Shopping Centres have a responsibility to meet customer expectations and adapt accordingly. By providing a safe and comfortable space for all members of the community, family rooms promote social inclusion and ensure that everyone can participate in the shopping experience, without barriers.
Convenience is another significant aspect of family rooms given the challenges of navigating crowded centres with young children. Family rooms offer a convenient place for nappy changing, breastfeeding and bottle feeding.
By catering to the needs of families, shopping centres can attract a loyal customer base and differentiate themselves from competitors. Additionally, positive experiences in family-friendly environments are likely to lead to repeat visits and word-of-mouth recommendations, ultimately driving foot traffic and increasing revenue for retailers.
An example of this type of project in the community is the recently installed family room at Swords Pavilions Shopping Centre. Opened in May 2023 and located on the ground floor, it has created an environment for privacy and has received excellent customer feedback.
The Bannon Property Management team works with shopping centres across Ireland, to support them in enhancing the shopping experience and promoting community well-being. By providing a welcoming space with essential amenities and fostering a sense of inclusion and support, these facilities contribute to making outings with children more manageable and enjoyable for families.
Author: Aoife McGovern, Surveyor, Bannon
Date: 26th February 2024
The Irish high street has traversed a tumultuous decade, yet it appears to have regained favour among discerning investors. Emerging as a darling for family offices and high net worth individuals, the market is witnessing a surge in acquisitions of premium-grade assets, precisely when big institutions are divesting their holdings. This confluence of demand-and-supply dynamics has kept pricing in check, presenting a unique window of opportunity. But why is the current pricing considered favourable amid projections of decline in other sectors?
The recovery of the Irish high street commenced in 2013, coinciding with a shift towards positive consumer sentiment. However, the landscape was disrupted by a spate of UK retailer collapses, exacerbated by Brexit uncertainties, that dragged it back while the other sector of the market continued to surge forward. While these UK failures were primarily due to overexpansion in a weakened market and subpar retail offerings, their impact rippled across Grafton Street. At its nadir, nearly 20 units stood vacant or available for assignment, including premises that had been occupied by prominent brands such as Monsoon, Oasis and HMV.
In the aftermath of Brexit, these vacated spaces enabled Grafton Street to transform, as quality international lifestyle brands replaced their predecessors. These brands not only focused on in-store turnover but also utilised the physical space as a platform for online marketing and customer engagement. The influx of brands such as Victoria’s Secret, Rituals and Ray-Ban propelled Zone A rents from a low of €350 per sq ft in 2012 to a peak of €650 per sq ft by 2019. Supported by a low-interest environment, yields also experienced a substantial recovery from over 6 per cent in 2012 to approximately 3.5 per cent to 4 per cent by the end of 2019.
The onset of the Covid-19 pandemic triggered another reversal in this trajectory. Footfall on Grafton Street plummeted from 25.25 million in 2019 to 12.8 million for 2020-21, with Henry Street experiencing a similar downturn. Consequently, rents and yields recoiled once again. This setback was further compounded by successive interest rate hikes in the following year, leaving the high street grappling with a resurgence of challenges. So unlike other segments of the real-estate market, the high street never fully recuperated from the global financial crisis. Compounded by apprehensions surrounding ESG retrofitting and the rise of remote work, rents and yields have regressed to levels reminiscent of the late 1990s. Zone A rents for Grafton Street have dipped below €500 per sq ft, while Henry Street hovers around €250 per sq ft. Yields for Grafton Street exceed 5.5 per cent, with Henry Street surpassing 6 per cent. These levels were not helped by the recent Dublin riots, which despite possible material long-term benefits in terms of policing and general political focus on the city, further damaged the perception of the sector.
But paradoxically, the sector’s pricing defies its actual performance. Occupational demand remains robust, buoyed by a prosperous Irish consumer base bolstered by unprecedented savings and robust employment growth. Despite a disappointingly slow return to the office, footfall derived from core sources such as shoppers, tourists and students is nearing pre-pandemic levels. Moreover, the relatively low cost of making these assets ESG-compliant adds to the disparity in pricing compared to the office sector.
In 2023, Grafton Street witnessed 88 per cent of its 2019 footfall, with the lower end of the street slightly weaker at 77 per cent as final units were leased up. However, the real resurgence is observed on Henry Street, with footfall reaching 106 per cent of 2019 levels at the Mary Street end and 85 per cent at the O’Connell Street end. This weaker end of street is likely to benefit from the impending arrival of a number of game-changing retailers. These include the long-awaited conversion of the former Debenhams into an extended Zara, alongside Sports Direct, Flannels (or Frasier’s), and the imminent debut this summer of Decathlon and H&M in the former Clerys department store around the corner. The long-awaited redevelopment of the Hammerson Dublin Central site is also another big game changer on the horizon. This is why many are reading the data rather than the perception and getting in early on what is seen as a very low pricing ebb for quality long-term pension-grade assets.
Joint agents Bannon and Sherry FitzGerald Declan Woods are guiding a price of €1.5 million for a 4.78-hectare (11.80-acre) site zoned for residential development on the outskirts of Cavan Town.
Located just 1.2km from Main Street in Cavan town centre, the subject site at Drumalee has two land-use designations within the Cavan Town Local Area Plan 2022-2028. Approximately six acres is zoned Proposed Residential, with the remainder zoned Residential Strategic Reserve.
The local area plan identifies an anticipated average density of eight residential units per acre on the lands zoned Proposed Residential, suggesting the front portion of the site could accommodate up to 50 housing units (subject to detailed design and planning permission). The lands are being sold on behalf of St Patrick’s Trust, which holds the property in trust on behalf of the Diocese of Kilmore.
Drumalee is an established residential location in Cavan Town. The area is well served by amenities including the nearby Loughtee Business Park, which is home to Tarpey’s SuperValu, Cavan Primary Care Centre, Haven Pharmacy and other local businesses. There are several educational facilities in the immediate vicinity, including St Clare’s primary school, St Patrick’s secondary school, Breifne College, Gaelscoil Bhréifne and Cavan Institute of Further Education.
Commenting on the sale, Niall Brereton of Bannon said: “It Is seldom that such a well-situated landholding comes to the market in Cavan Town. As is the case with many other provincial towns, demand for housing in Cavan continues to outstrip supply. The regional planning framework for the area envisages population growth of over 30 per cent between now and 2040. This site will allow developers to bring forward development proposals on an incremental basis (subject to planning consent) to meet current and future housing needs.”
I am a final year student studying the undergraduate Property Economics Degree at Technological University Dublin. This year I am also working at Bannon on a part-time basis. I am fortunate to be able to remain in the market whilst studying, as this brings a great advantage to my understanding of concepts in college from a real world work environment.
Both industry and University have strong influences on each other and allow me to reflect my learning in both fields. Working in the market while studying for my degree is hugely beneficial as I am always aware of the current market trends which can be incorporated into many college assignments. Working at Bannon has allowed me to fulfil my academic requirements as well as going into the office and being interactive and having conversations with colleagues. I think engagement and people skills are key in the industry which is what I am most grateful for when working at Bannon. I am exposed to weekly Team and external meetings regularly and the overall office culture.
I am currently working alongside Neil Bannon, Cillian O’Reilly and Alison Manning in the Consultancy team at Bannon, the department where I previously completed my 6-month internship. I chose to stay in the consultancy department going forward into my part-time work as I had such a great experience during my internship. Consultancy involves plenty of thorough research and data analysing which I appreciate as crunching numbers and finding the latest statistics is exciting!
Balancing work and college throughout my final year of studies has been everything but a hindrance, Bannon has made this balance enjoyable and has been an added advantage. I continue to gain a tonne of knowledge and always have wonderful support. I can unquestionably say that I work with an unbeatable team here!
Author: Emily King, Intern, Bannon
Date: 9th February 2024
Online shopping is a current reality for today’s retail consumer, but its recent penetration of total retail sales appears to have plateaued. In December 2019 pre pandemic, the total turnover generated by online sales excluding motor trades was 5.9%. Five years on, the CSO statistics released for December 2023 indicated that online sales were at 6.2%, virtually the same as its 2019 equivalent results.
The current narrative surrounding online shopping is that it is consistently on the rise in popularity. Contemporary statistics contradict this narrative. As expected, online sales increased dramatically during the covid-19 pandemic due to lockdown and the closing of retail stores. In November 2020 during the second lockdown, online sales reached a staggering 16.5% of the total turnover generated, excluding motor trades. This statistical outlier fed into the widely held narrative that online was on track to taking over the retail market. Despite Covid and lockdowns causing a peak in online sales, present day data conveys that turnover generated by online sales have reverted to where they were in 2019.
It was inevitable that there would be some reduction in online sales when stores reopened but the prevailing idea at the time was that online sales would hold onto to some of the gains that it had made. One explanation as to why the online platform did not retain its momentum is that the fight for retail sales is not a one-sided battle. This is perhaps most evident in the Black Friday / Cyber Monday phenomenon. Black Friday started as a US retail sales event for the day after Thanksgiving. It was quickly adopted by online retailers who came out with Cyber Monday. Black Friday is now an established part of the retailer market in Ireland annually. It is a clear bunfight for spending between retailers of all sizes and trading formats. The retailer has adapted to the needs of the consumer who for the time being prefers to shop in store for the overwhelming majority of their purchases.
Author: Alison Manning, Graduate Surveyor, Bannon
Date: 8th February 2024
Today, 1st February 2024, marks the launch of Ireland’s Deposit Return Scheme.
Over recent months, retailers throughout our nationwide retail management portfolio have been installing reverse vending machines in anticipation of this momentous occasion.
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.
We invite you to join us in championing a sustainable future.
Our first Retail Pulse of 2024 has now gone live.
In this publication, Neil Bannon looks at a year of growth in the retail sector in 2023 building on 25 years of growth in Ireland.
To view the full report, please click here.
The latest Retail Sales figures indicate a very positive environment for retailers trading in Ireland. Since 2019, the last pre Covid year, retail sales have grown by over 25% in value terms, 20% when you exclude motor sales (which grew by a stunning 40% during the same period).
This growth is not restricted to the booming retail park sector, the value of clothing and footwear sales grew by almost 19%.
CSO (Central Statistics Office Ireland)
Commercial property managers face new challenges in 2024. These challenges need to be addressed using knowledge, expertise and technological innovation. As the economic, social, and technological spheres evolve, property managers are forced to look at what measures can be implemented to ensure the smooth operation of commercial spaces.
Based on industry data and expertise, the Bannon Property Management team forecast 6 key challenges for 2024:
Economic uncertainty:
The global economic volatility has impacted businesses and the real estate industry. Maintaining profitability and sustainability of commercial properties whilst navigating inflation, interest rate fluctuation, economic uncertainty and the aftermath of the COVID-19 pandemic, is a complex balancing act. Property managers play a vital role in offsetting these factors by implementing costs saving strategies and ensuring value for money for occupiers. It is also essential that property managers stay informed about market trends, fostering relationships and embracing technology for efficient operation of real estate assets.
Sustainability and Environmental, Social and Governance Compliance:
In 2024 there will be a continued focus on environmental, social, and governance (ESG) criteria in the real estate sector. Property managers are tasked to implement sustainable practices, reduce carbon footprints and enhance energy efficiency in commercial properties. This is driven by both client goals and legislative requirements. Solutions to meet these standards not only contribute to environmental conservation but also enhance the marketability of the properties. Bannon in partnership with sister company Evia has developed and implemented numerous complicated and effective ESG projects on behalf of clients to effectively deliver on these tasks in 2024.
Technological Integration:
The rapid advancement of technology is transforming the way commercial properties are managed. Property managers are faced with the challenge of integrating smart building technologies, data analytics, and automation systems to optimize operations. This will involve significant investments in upgrading existing infrastructure and training personnel to harness the full potential of these innovations. Bannon collates and interprets a huge amount of data in relation to assets under our management. This data and its interpretation offer significant insight to Bannon when recommending projects to clients for individual asset maintenance, management and performance.
Remote Work Impact:
The widespread adoption of remote work has altered the dynamics of commercial spaces. Property managers must respond to the changing demands for flexible office spaces, hybrid work models and the need for advanced digital infrastructure. Adapting commercial properties to meet the evolving needs of tenants in this new era of work will continue to be a crucial aspect of property management in 2024.
Rising Operating Costs:
Escalating operational expenses, including property maintenance, utilities and insurance, pose a significant challenge for property managers. Balancing the need to keep costs in check while delivering high-quality services to tenants requires strategic financial management. Bannon is acutely aware of the impact high operating costs have on the attractiveness of assets from both an owners and occupiers’ perspectives. Cost management underpinned by value for money remains a key cornerstone of Bannon property management ethos.
Tenant Retention and Experience:
With a competitive commercial property market, tenant retention is crucial for property managers. Providing a positive occupier experience, addressing concerns promptly, and fostering a sense of community within commercial spaces are vital to retaining occupiers and attracting new ones.
Commercial property managers continue to navigate a complex landscape. Successfully addressing the issues highlighted requires a proactive approach, strategic planning and a willingness to embrace innovation. As the real estate industry continues to evolve, property managers who can adeptly navigate these challenges will be well-positioned for success in 2024 and beyond. The Bannon property management has a proven track record in embracing and implementing best in class approaches. A certainty for 2024 is that this will remain the case.
Author: William Lambe, Divisional Director, Bannon
Date: 24th January 2024
Dublin office market take-up reached 1,441,000 Sq.ft. for 2023. This take-up figure represents a 45% decrease on 2022 and a 56% decrease on Q3 2019 (pre-covid). Despite this however, the number of transactions remained steady with 202 transactions completing in 2023, compared to 219 in 2022 and 204 deals completing in 2019.
Smaller office space continues to dominate the market with 62% of transactions falling in the < 5,000sq.ft. range. The average deal size for the year reached 7,134.1 sq.ft. (-41% on 2022). There is currently 751,456 sq.ft. of space currently reserved in the capital across 77 transactions.
2023 was very much “annus horribilis” in terms of capital market’s activity. Concluding with a total turnover of €1.85 billion it represents the lowest level of activity since 2012. Clearly the pricing uncertainty brought about by the ending of the free money era, driven by a multitude of geopolitical and economic factors, has had the biggest effect.
See our latest Capital Markets report with analysis of both the past quarter and the year as a whole plus insight from our Capital Markets Director Roderick Nowlan.
To view the full report, please click here.
Our final Retail Pulse of 2023 has just gone live. All in all, an exceptionally busy year for the team at Bannon and the Retail sector.
Neil Bannon concludes this Retail Pulse with a recap of 2023 and why there is reason to be positive when looking forward into 2024. The glass is always half full!
Finally, everyone at Bannon would like to wish all our clients and friends a very Happy and Peaceful Christmas. See you all in 2024!
To view the full report, please click here.
In this publication our leasing team summarise some of the more significant recent transactions and Neil Bannon focuses on footfall levels on our two most prominent high streets, namely Grafton Street and Henry Street, where current activity has proved very much contrary to previously predicted bad news speculation.
To view the full report, please click here.
The United Nations (UN) annual climate change conference, also known as the ‘Conference of the Parties’ or ‘COP’, brings together world leaders, ministers, and negotiators to agree on how to address climate change.
Since 1995, almost every member nation on Earth has come together in a different country each year, except for 2020.
The UN describes the COP as “the supreme decision-making body” of the United Nations Framework Convention on Climate Change (UNFCCC). It includes representatives of all the countries that are signatories, known as parties, to the UNFCCC. During each COP, the parties review the progress towards the overall goal of the UNFCCC: to tackle climate change.
The negotiating parties include governments that have signed the UN Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol and/or the Paris Agreement. The COPs are also attended by thousands of representatives from civil society, the private sector, international organisations, and the media.
Why is this conference called COP28?
COP28 stands for the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change
Where will COP28 be hosted?
The COP is hosted by a different country each year. COP28 will be hosted by the United Arab Emirates (UAE) and will take place between 30 November–12 December 2023 in Dubai.
Why is COP28 important?
It is hoped COP28 will help keep alive the goal of limiting long-term global temperature rises to 1.5C. This was agreed by nearly 200 countries in Paris in 2015. The 1.5C target is crucial to avoid the most damaging impacts of climate change, according to the UN’s climate body, the Intergovernmental Panel on Climate Change (IPCC).
Long-term warming currently stands at about 1.1C or 1.2C compared with pre-industrial times – the period before humans started burning fossil fuels at scale. However, the world is on track for about 2.5C of warming by 2100 even with current pledges to tackle emissions. The window for keeping the 1.5C limit in reach “rapidly narrowing”, the UN says.
UN Secretary-General Antonio Guterres called for the COP28 talks and agendas to close the climate ambition gap. He also stated that “Leaders can’t kick the can any further. We’re out of road,” condemning a “failure of leadership, a betrayal of the vulnerable, and a massive, missed opportunity. As the reality of climate chaos pounds communities around the world – with ever fiercer floods, fires, and droughts – the chasm between need and action is more menacing than ever.”
What are the key issues to watch at COP28?
For more information on COP28
https://news.un.org/en/story/2023/11/1143567
To view the full report, please click here.
Among the recently announced package of fiscal measures introduced by the Government as part of Budget 2024 was a 12-month deferral of the Residential Zoned Land Tax (RZLT). The tax liability, which was due to be paid by landowners as and from 1st February 2024, will not now fall due until February 2025. The RZLT equates to an annual liability equal to 3% of the market value of land which is deemed suitable for residential development.
While the 12-month deferral will no doubt be a welcome development by liable landowners they will face a choice as to the future prospects for their property. Among others, the Bannon Development Land Team has identified three fundamental options open to impacted landowners:
1. Dispose of the land
2. Seek a re-zoning of the land via the Local Authority
3. Undertake residential development.
Under the third option, the RZLT liability will only cease to accrue when completed residential units are delivered and will continue to be incurred during the construction phase.
While the option to seek a re-zoning from residential uses will ultimately result in the tax liability being removed it will also result in a significant diminution in the value of the land. This may not be such an issue for certain owners such as farmers whose primary interest is working the land. However, the vast majority of landowners may be very reluctant to actively seek to diminish the value of their property via rezoning.
Whatever the ultimate course of action it is clear that a lot of important decisions will need to be made by landowners impacted by RZLT in 2024. If this impacts you, talk to the team today to start planning your strategy early.
Author: Niall Brereton, Director, Bannon
Date: 14th November 2023
Huge congratulations to Ian Hunter and the team in Swords Pavilions Shopping Centre on their win at the Pakman Awards. The team are now officially industry leading! The first shopping centre to win this award and a reflection of all the hard work in the centre.
**Exciting opportunity in the heart of the innovative Windmill Quarter in Dublin’s South Docks.**
We are pleased to present the final ground floor suite (front) of 50 City Quay, Dublin 2. Offering a superb waterside location suitable for both office and retail uses, extending to 692 Sq.ft.
Contact Lucy Connolly or Julia Halpenny to schedule an inspection and learn more about this exceptional space.
Sligo’s Quayside Shopping Centre has once again earned the prestigious title of All-Ireland All-Star Shopping Centre of the Year, bestowed by the All-Ireland Business Foundation. This marks the fifth Business All-Star recognition for this esteemed retail destination.
As it enters its 18th year in business, Quayside Shopping Centre stands out for consistently upholding the highest standards of trust, commitment, performance, and customer centricity.
Located at the heart of Sligo Town, Quayside Shopping Centre boasts 400 customer parking spaces and an expansive 130,000 square feet of retail space across four trading levels. The centre encompasses 43 Retail Units, 12 Office Suites and 89 Residential units in total.
Distinguished by its unique combination of open streets and covered malls, Quayside Shopping Centre is meticulously designed to cater to the needs of contemporary retailers while ensuring that customers enjoy a relaxed, secure, and convenient shopping experience.
This All-Ireland All-Star Shopping Centre of the Year accolade elevates the company into an exclusive league of businesses that have achieved a remarkable five-time Business All-Star recognition.
Announcing the news of Quayside Shopping Centre’s achievement, Deputy Chair of AIBF’s Adjudication Board, Kieran Ring, said:
On behalf of the All-Ireland Business Foundation I am delighted to announce that Quayside Shopping Centre have achieved All-Ireland All-Star Shopping Centre 2023-2024. This accreditation is in recognition of the company’s outstanding contribution to quality and standards in the sector over the last 5 years. This accreditation recognises Quayside Shopping Centre’s conduct in the areas of trust, commitment, performance & customer centricity. Quayside Shopping Centre is hereby included in the AIBF Register Of Irish Business Excellence for the fifth consecutive year.
Reacting to the news of her company’s achievement, Quayside Shopping Centre Manager & Head of Marketing, Christine Dolan said:
‘On behalf of everyone working at Quayside Shopping Centre in Sligo, I would like to express our sincere gratitude and delight at being named as All-Ireland All-Star Shopping Centre of the Year for 2023/2024 including receiving Business All-Star accreditation for the fifth consecutive year. We are absolutely thrilled to hear that our centre has once again achieved such a prestigious title. This remarkable accomplishment is a testament to the dedication and tireless efforts of our exceptional team of retailers and staff who work here. We couldn’t be prouder of their commitment to upholding the rigorous standards set by the All-Ireland Business Foundation.
As an integral part of the vibrant community in Sligo, we take our role seriously and are committed to going the extra mile for our customers. While this accolade recognises our efforts, we want to emphasise that much of the work happens behind the scenes.
We are dedicated to continually improving the centre’s services and facilities, ensuring that each visit to Quayside is a remarkable experience. This recognition further inspires us to continue providing a top-tier shopping experience for our valued customers.’
Managing Director of the All-Ireland Business Foundation Kapil Khanna said: The accreditation, which is now held by over 650 firms, is needed by the thousands of small and medium businesses which operate to their own standards but have nothing to measure them by.
He said: We evaluate a company’s background, trustworthiness and performance, and we speak to customers, employees and vendors. We also anonymously approach the company as a customer and report back on the experience. The business goes through at least two interviews and is scored on every part of the process against set metrics.
About The All-Ireland Business Foundation
The All-Ireland Business Foundation is an autonomous national accreditation body tasked with enterprise development and the promotion of Best-in-Class Irish businesses.
As the accreditation body for the Business All-Star mark, the AIBF recognises Best-In-Class Irish businesses. Companies that merit recognition based on an independent audit of their performance, reputation, and customer-centricity.
Article Published by All Ireland Business Times
In this publication our leasing team summarise some of the more significant recent transactions and Neil Bannon focuses on footfall levels on our two most prominent high streets, namely Grafton Street and Henry Street, where current activity has proved very much contrary to previously predicted bad news speculation.
To view the full report, please click here.
In early September I had the privilege of joining Bannon as a Graduate Surveyor. Having completed my internship in Bannon in third and fourth year as part of my Property Economics degree I was already familiar with the office setting and the familiar faces. The positive and friendly atmosphere made this transition seamless. Starting any job can be daunting but I have felt that in Bannon they have been very supportive in every way to help me settle into professional life.
I joined the Capital Markets and Office teams working alongside Rod Nowlan, Lucy Connolly and Julia Halpenny. Having previously worked in this area during my internship I was aware of the fast-paced industry of the investment world. From shopping centres to Georgian offices, I was well exposed to the different avenues of the property industry as well as gaining invaluable experience from my colleagues. It was very satisfying applying theory to practise moving from college to the working world as well as meeting new faces along the way and learning from their past experience.
Throughout my final year of college, I was always supported by my colleagues in Bannon who helped me throughout the year with advice for my thesis and various projects, their support was very reassuring in what proved to be a very stressful academic year. This help has been very much continued as I move into the next stage of my career as I have been assured that if I need anything, they are always there to guide me.
The positive culture in Bannon as well as the friendly and intelligent professionals that work here have definitely played a part in developing my growing knowledge of the property industry as well as helping build my character as a person. I am very grateful to Bannon for the opportunity and I look forward to continuing to work with the great Bannon team!
Author: Brian Morton, Graduate Surveyor, Bannon
Date: 17th October 2023
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.
It is crucial to prioritise and establish a comprehensive water conservation strategy for any asset. Some factors to consider include:
The primary water conservation objective of an asset is to conserve a natural commodity. It is based on efficiencies like reduced flows, leak detection and the introduction of rainwater harvesting systems for non-potable use (e.g., toilets, general cleaning). Conserving water reduces the need for costly infrastructure expansion and maintenance, providing a positive impact on the environment and service charges.
Once you have developed and integrated water conservation, there is a secondary sustainable measure that can explored.
When we think about sustainability measures, several projects typically come to mind. Solar PV Panels, EV Charging Stations, LED Lighting, Rainwater Harvesting – the list goes on. Asset Managed Water Wells are one of the least utilised sustainability initiatives explored in Ireland. What a missed opportunity given the wet summer we just experienced!
Asset Managed Water Wells are renewable sources that have the potential to provide water to common area facilities such as toilets and tap water (not for consumption) in public spaces. Take shopping centres for example. There are a small number of shopping centres in Ireland that have implemented Asset Managed Water Wells, but why are more centres not doing the same? One barrier is that the drilling process on-site is not a simple option. The site must meet many conditions and most importantly, the drilling must find a water source.
Exploring the eligibility of your site is worthwhile. In line with a decision by the Commission for Regulation of Utilities (CRU) on non-domestic tariffs, a new set of national water and wastewater business charges came into effect on the 1st of October 2021. There has been no change to charges since 2014. Historically, customers would have paid charges based on their local authority. The newer system introduced four bands based on the level of usage. Having an Asset Managed Water Well on site would remove the need for public water which in turn would reduce water rates.
A well-developed and integrated strategy can be used in line with public water systems. This is a visionary objective that should be embraced to protect the long-term vulnerability of this natural resource. From a commercial perspective, the savings are significant.
Be a visionary! Talk to Evia Sustainable Real Estate or Bannon Property Management team in advance of your next budget year to discuss potential savings and projected payback.
Author: Aoife McGovern, Surveyor, Bannon
Date: 13th October 2023
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.
As investors, owners and occupiers are conscious of the environmental performance of their buildings, questions have been raised about the future of Georgian office space. Will these buildings become obsolete?
There is still a market for Georgian office space, however, that market has changed. A noticeable shift that the Bannon Office team is seeing in the letting patterns of Georgian office spaces is a departure from the conventional practice of leasing entire buildings to a more dynamic and adaptable approach of floor-by-floor rentals. This change reflects a growing recognition of the versatility and scalability that these historic properties offer. Businesses now have the flexibility to lease only the space they require, allowing for more tailored solutions to suit their specific needs. This trend is not only a reflection of the evolving preferences of tenants but also a testament to the adaptability of Georgian office spaces, which can seamlessly accommodate a variety of businesses in this modern age of flexible workspaces.
The notable shift toward floor-by-floor rentals in Georgian office spaces can be largely attributed to the increasing demand among companies to be located on a single, unified floor plate. While Georgian buildings exude historical charm and elegance, their architectural layouts often prove less suitable for larger businesses seeking consolidated office spaces. However, this transition aligns perfectly with the needs of smaller businesses and startups that value the intimacy and functionality of smaller floor plates. For these companies, Georgian office spaces are emerging as ideal options, offering the perfect blend of history, character, and practicality that caters to their specific spatial requirements, ultimately making them a sought-after choice in the ever-evolving landscape of modern office leasing.
This trend in the Georgian office market represents a compelling opportunity for small businesses to reclaim a central presence in the heart of the city. Georgian offices, with their affordable pricing ranging from €30-€45 per square foot, depending on quality, size, specifications, and location, offer an attractive alternative to the considerably more expensive €60-€65 per square foot rates associated with modern buildings.
Small businesses recognise the essential value of a city centre “hub” to conduct their operations effectively. This affordability enables them to thrive in prime city centre locations, fostering collaboration and networking while contributing to the revival of vibrant business communities in the heart of the city.
Author: Julia Halpenny, Surveyor, Bannon
Date: 9th October 2023
There were two key takeaways from this quarter’s Capital Markets figures. First and foremost, for the first time in almost a decade there were no material PRS transactions. The second was that two purchasers, specifically Davys and French Fund Corum, accounted for almost 50% of the entire quarter’s market turnover with the acquisition of 10 separate assets.
To view the full report, please click here.
We are into Q4 and our retail based trackers continue to show improving trends year on year. In our latest Pulse, Neil Bannon considers the question – What does inflation mean for retail rents?
To view the full report, please click here.
Dublin office market take-up reached 354,000 Sq.ft. for the third quarter of the year, bringing the year to date total to just under 1,100,000 Sq.ft. This take up figure represents a 20% decrease on Q2 2023, a 56% decrease on Q3 2022 and a 1.5% decrease on Q3 2019 (pre-covid).
Q3 is traditionally the most subdued quarter following the summer break, however, transactions have remained steady with 54 deals recorded, resulting in an average deal size of 6,500 Sq.ft. (-15% on Q2 2023). There is currently 717,000 Sq.ft. reserved across 75 transactions.
As technological advancements continue to reshape industries across the globe, discussions surrounding the potential impact of artificial intelligence (AI) on various property sector roles have become common. In the Bannon realm of commercial property management, suggestions have been made that human property managers could be made redundant considering AI’s capabilities. Following deeper analysis, Bannon believes that AI is not poised to make commercial property managers redundant but to augment the role and enhance efficiencies.
To paraphrase Mark Twain, the reports of the death of property managers have been greatly exaggerated! We have identified seven key reasons why we think AI will not replace humans in the sector.
The belief that AI will be making commercial property managers redundant is based on a misunderstanding of the nuanced, multifaceted nature of property management. By embracing technology as a tool rather than a replacement, commercial property managers can leverage AI to elevate their roles and provide even greater value to property owners and occupiers alike.
The Bannon Property Management team has been utilising AI for several years to collate and interpret the many data points property managers collect. This has ensured that data is presented in a clear and concise manner to our clients leading to more informed decisions and strategies for the assets we manage. Bannon has embraced AI to ensure we continue to provide best-in-class services to our clients.
Author: William Lambe, Divisional Director, Bannon
Date: 2nd October 2023
The European Union has taken a significant step towards promoting sustainability by introducing the EU Taxonomy Regulation. This ground-breaking initiative aims to provide a standardized framework for identifying environmentally sustainable economic activities. This article explores the EU Taxonomy, its significance, and the implications it holds for businesses and investors.
What is the EU Taxonomy?
The EU Taxonomy is a system that categorizes environmentally sustainable economic activities, offering clear and consistent guidance for sustainable investments. It helps investors and businesses align their financial choices with environmental goals and encompasses various sectors like energy, real estate, and agriculture.
Key Components of the EU Taxonomy
The Taxonomy focuses on six environmental objectives:
Each objective is accompanied by specific criteria that economic activities must meet to be classified as environmentally sustainable.
One of the core principles of the EU Taxonomy is the Do No Significant Harm principle, which ensures that an economic activity must not cause significant harm to any of the environmental objectives. This means that businesses seeking to be classified as environmentally sustainable must meet stringent criteria to avoid adverse impacts on the environment
Companies are required to disclose the extent to which their activities align with the Taxonomy’s criteria in their financial reporting. This transparency allows investors to make informed decisions about their investments based on environmental considerations.
Significance for Businesses:
Businesses that follow the EU Taxonomy can tap into a growing pool of sustainable finance opportunities, like green bonds and loans that are gaining popularity with investors. Compliance with the Taxonomy can help businesses secure funding from these sources. Moreover, adhering to Taxonomy standards showcases a commitment to environmental sustainability, boosting their reputation and attracting socially responsible investors and customers. It also helps businesses identify and minimize environmental risks, reducing their exposure to regulatory and operational challenges in a world that places a high value on sustainability.
Significance for Investors
Investors can make smarter choices by checking a company’s sustainability disclosures through the Taxonomy. This allows them to match their portfolios with their environmental, social, and governance objectives. Investing in Taxonomy-compliant companies can lower the risk tied to environmental issues and changing regulations. It also helps investors steer clear of investments that might become obsolete as the world moves toward a greener economy.
The EU Taxonomy is a crucial step in promoting environmental sustainability in finance and real estate. It offers a consistent way to identify eco-friendly activities, benefiting businesses and investors. As sustainability becomes more important, the Taxonomy will play a key role in changing how we invest and allocate capital, ultimately helping the environment. Using this framework can bring financial benefits and help create a more sustainable and resilient future for everyone.
Author: Cillian O’Reilly, Surveyor, Sustainability Manager, Bannon
Date: 14th September 2023
In the ever-evolving landscape of commercial real estate, sustainability is a paramount consideration. As we strive to reduce our carbon footprint and address climate change, understanding and managing greenhouse gas emissions is crucial for the industry’s future. In this article, we’ll explore how Scope 1, 2, and 3 emissions apply specifically to the commercial real estate sector and why they should be at the forefront of our strategies.
Scope 1 Emissions: The Building Blocks
Scope 1 emissions in commercial real estate pertain to direct greenhouse gas emissions resulting from sources owned or controlled by a property owner or occupier. These emissions are produced within the boundaries of the property and are directly tied to its operations. Common examples include emissions from on-site heating, cooling, and electricity generation systems, as well as emissions from owned or leased vehicles used for property maintenance and management. For the commercial real estate sector, tackling Scope 1 emissions can involve upgrading building systems for greater efficiency, transitioning to renewable energy sources, and implementing eco-friendly transportation options for maintenance and management teams. Reducing Scope 1 emissions demonstrates a commitment to environmental stewardship and can improve the marketability of properties.
Scope 2 Emissions: The Energy Equation
Scope 2 emissions are indirect emissions associated with the generation of purchased electricity, heat, or steam consumed by a commercial property. These emissions are linked to energy sources outside the property boundaries, such as the local power grid. In the real estate context, Scope 2 emissions mainly comprise the carbon intensity of the electricity used to power the building and its operations. To address Scope 2 emissions, property owners and occupiers can consider procuring green energy or renewable energy certificates. Transitioning to cleaner energy sources not only reduces the carbon footprint of a property but can also enhance its appeal to environmentally conscious tenants.
Scope 3 Emissions: The Ripple Effect
Scope 3 emissions are the broadest and often the most challenging to quantify in commercial real estate. These encompass all other indirect emissions along the value chain of the property but outside the control of the owner or occupier. For the commercial real estate sector, Scope 3 emissions can include emissions associated activities such as commuting and business travel, as well as emissions embedded in the products and services used in the building. Addressing Scope 3 emissions requires collaboration between property owners, occupiers, and suppliers. Encouraging sustainable commuting options, supporting telecommuting, and sourcing eco-friendly products and services within the building can make a significant impact on reducing the overall carbon footprint.
In summary, understanding and managing Scope 1, 2, and 3 emissions are pivotal for the future of commercial real estate. These three scopes provide a holistic view of your environmental impact, from the direct emissions under your control to the broader, indirect emissions associated with your operations. It’s not only about reducing environmental impact but also about meeting the increasing demand for sustainable and eco-conscious properties. By embracing green building practices, optimizing energy usage, and engaging in sustainable supply chain management, the commercial real estate sector can lead the way toward a more environmentally responsible and resilient future.
Author: Cillian O’Reilly, Surveyor, Sustainability Manager, Bannon
Date: 13th September 2023
As we begin World Green Building Week, Bannon is proud to launch its 2022 ESG Report. Through numerous initiatives, Bannon far exceeded its ESG goals, achieving a carbon footprint reduction of 34%. Bannon looks forward to working with Owners, Occupiers and all interested parties in the real estate sector to curate a more sustainable future.
To view the full report, please click here.
Our latest Pulse highlights a number of developments bringing new space to the market for the first time in over a decade and the opportunity for European retailers in the Irish market.
To view the full report, please click here.
Quarter 2 Dublin office take up exceeded 440,000 sq.ft. resulting in an increase in average deal size to 7,720 sq.ft. (24% increase on Q1 2023)
City Fringe and Suburban markets performed particularly well this quarter accounting for 60% of all take-up. Dublin continues to attract a diverse mix of industries with professional services, finance and state agencies the most active sectors this quarter with TMT accounting for just 6% of total take up, a decrease of 35% from the same quarter of 2022. We commence Q3 with over 665,000 sq.ft. of office space currently reserved.
See full details below together with expert insight from Lucy Connolly.
To view the full report, please click here.
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 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
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
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.
This quarter proved to be a challenging period for the Irish Capital Markets sector, with a total value of only €333m. Q2 marks one of the worst performing quarters in the last six years. On a positive note, after years in purgatory, the retail sector has emerged as the star performer for the period, accounting for 38% of turnover. Although this quarter’s relative increase 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 where no less than six retail parks have traded this quarter alone amounting to approx. €116m.
To discuss this, please contact Roderick Nowlan, Alex Patterson, Cillian O’Reilly and George Colyer.
Bannon’s latest monthly Retail Pulse has now gone live.
In this publication we look at retail occupier activity on Henry Street & O’Connell Street and Neil Bannon discusses the juxtaposition of the vacancies created by Debenhams failure in Ireland and the UK.
To view the full report, please click here.
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.
Amid reports of a post-Covid hollowing out of city centres like San Francisco, and to a lesser extent New York and Los Angeles, as retailers suffer the effects of working from home, Ireland’s recovery is gathering pace, and by most measures is now stronger than it was pre-pandemic.
But Ireland too has a high reliance on technology workers, who may also be adopting hybrid working practices, so why is the Irish market performing better than the US, the UK, and many other markets?
I asked retail expert Neil Bannon, Executive Chairman at Bannon, and the first reason is that the US, for example, has six times more retail space per capita, than Ireland.
“Just imagine that we had another six Dundrum Town Centres, Liffey Valley’s, Blanchardstown Town Centres and six times every other shop in Dublin, and that is the scale of the over-supply in America,” he said.
In Ireland there has been no new shopping centre built since 2010 and no new retail park developed since 2007.
While our construction of new homes has been too slow, it has recently hit record levels, and this too, is driving demand.
There are just over two million households in Ireland, he told me, and the Housing for All Plan aims to produce another 300,000 new homes by the end of the decade.
‘In Ireland there has been no new shopping centre built since 2010‘
But there seems to be consensus that we need 500,000 new homes, which represents one new home for every four existing homes, “a staggering increase”, he added.
The impact of this growth is already being seen on Ireland’s 73 retail parks, 20pc of which are managed by Bannon.
Retail parks are the conduit for the overwhelming majority of spending associated with housing, Mr Bannon said – for example couches, TVs, white goods and floor coverings – with 85pc of sales taking place in store, according to Central Statistics Office figures.
“If every house in Ireland spends €2,500 annually on household goods, that’s up to €12.5bn of spend. If 500,000 new homes are built, and the average cost of kitting them out is €25,000, that’s another €5bn of expenditure,” he said.
One result is that Ireland’s retail parks are largely at full occupancy and rents are rising.
“We had expected some fall-off from the post-Covid DIY boom, but in fact, footfall and spending levels are stronger than pre-pandemic,” Mr Bannon said.
‘Ireland’s retail parks are largely at full occupancy and rents are rising.’
The most valuable retail park units were always those few with an ‘open user’ planning consent, permitting, for example, fashion retailers and not one that is just restricted to bulky goods.
However, a shift in the market is that furniture retailers are now out-bidding even open user retailers as evidenced by a deal just signed at Liffey Valley Retail Park where Danish brand JYSK has taken a 10,000 sqft unit plus mezzanine at a rent of approximately €25 per sqft.
That is, Mr Bannon notes, “a 40pc higher rent than pre-Covid”.
JYSK have taken half a dozen 10,000-15,000 sqft units in Ireland and continues to expand.
Another expanding brand that is already operating on several retail parks is EZ Living Furniture which also recently rented a 10,000 sqft unit plus mezzanine at Liffey Valley Shopping Centre.
It is not just the Dublin area as Limerick One Shopping Park has also seen new outdoor clothing and equipment retailer Mountain Warehouse recently lease a 7,000 sqft unit at approximately €28 per sqft.
The theme for the year ahead is “competition for space among brands and rising rents”, Mr Bannon concluded.
The effect hybrid working and ESG has, or will have, on office demand from office occupier, investor and owner standpoints cannot be considered in isolation. These influences must be considered within the wider office market ecosystem and how they operate in tandem to drive occupier decision making at lease event dates. The Covid Pandemic brought an instantaneous change to how we work whereas ESG requirements and regulations have been coming into the market at a steadier rate. While there is also uncertainty around the future of working models, that can be adapted and changed rapidly, there is no uncertainty about the increasingly important and dominant role ESG will play in the office sector. The ESG roll out will be slower and changes can be anticipated, however the ability to bring the stock to standard is a far more timely and resource intensive exercise.
Hybrid working for businesses will effectively assess how staff utilise office space as a resource to produce output. Ultimately it is the company who can decide how to implement their working models and the decisions will be led by the type of work carried out by the business, the need to attract and retain talent and the model that allows the business to grow and produce output efficiently. Both staff and workspace are a factor of production for a business and how the two are utilised against each other effectively to generate product should ultimately be the key focus of any commercial business. This should craft the post-pandemic workplace in the years ahead and this will likely differ industry by industry.
ESG considerations will continue to become more prominent drivers in the decision-making process for both occupiers, owners and investors. Currently, ESG in commercial real estate is very much lead by the private and financial markets, with factors such as corporate mandates and lender requirements influencing the demand for ESG grade space. It is envisaged that the regulatory environment (in an EU context) around occupation and investment will become more scrutinous and this will further drive the demand (and requirement) for ESG grade space in the future.
Occupiers will be looking into the impacts, whether they be positive of negative, that revised working models have on their ability to create an attractive and productive workspace as well as any ESG led requirements that are being implemented on a company specific or regulatory basis. The implementation of these will likely crystallise at either a lease break or expiry where spatial requirements can be most practically revised. Property owners will have to be cognisant of their occupiers’ requirements against key lease dates and how these correspond with asset management strategies to protect both the rental and market value of the building. Alternatively, investors must consider how to preserve or improve on an asset’s income at purchase or where opportunities may lie in bringing brown buildings into a green market.
Bannon have a suite of services available to assist CRE owners, occupiers and investors in strategic real estate decisions and ESG insights. Please feel free to reach out to discuss by emailing consultancy@bannon.ie.
Author: George Colyer, Surveyor, Bannon
Date: 16th June 2023
Bannon’s latest monthly Retail Pulse has now gone live. In this publication Neil Bannon shares some insights on what impact significant new housing supply will have on the retail sector.
To view the full report, please click here.
Environmental, Sustainable & Governance (ESG) requirements for buildings are becoming of increasing importance to both investors and occupiers for buildings. There is no doubt that ESG will become an increasingly prevalent element within the commercial real estate (CRE) landscape, becoming an important driver of asset value. This means current owners will be facing important considerations. How do you attract good quality occupiers, achieve strong rents and ensure a competitive market of buyers for your asset at exit. ESG-led objectives are becoming increasingly commonplace in investment and fund criteria for institutional real estate owners. As these owners are significant sources of capital in CRE markets a likely result will be a somewhat forced divestment from ‘brown’ assets (non-ESG compliant assets) and a channelling of capital towards ‘green’ (ESG compliant) assets.
The market is not balanced, green assets in Ireland are typically buildings constructed or extensively refurbished after the 2014 Building Regulations came into play. We estimate that the green market comprises less than 15% of Dublin’s office stock, with the majority of this space located in Dublin 2 and Sandyford, the prime office locations. With multiple players competing for a limited supply of stock and available capital being funnelled into this small sector an expectation is prices will be driven up by competitive bidding in both the investor and occupier markets. The net effect of these events will be an increase in asset value through growth income complimented by strong occupier covenants and yield compression.
By contrast, we expect a shift in the brown asset market. Company mandates or client requirements will oblige some occupiers to occupy green buildings, seeing the demand for brown space shrink and the market becoming increasingly oversupplied. The pressures resulting from falling demand and increased void costs, will create a lower rent environment. An exit of institutional grade investors will see the demand drop for these buildings with ESG rules preventing purchase. The remaining investors will have to consider the cost and value associated with bringing an asset into the green market. While the market for this in prime locations may be viable, there are greater challenges for suburban/out of centre locations where the end rental value that can be achieved may not support viability of refurbishment.
Rescuing these potentially stranded buildings represents an opportunity for investors and developers and Bannon working with our sustainability business Evia are available to provide technical insights to ESG building upgrades. Feel free to reach out to discuss.
Author: George Colyer, Surveyor, Bannon
Date: 9th June 2023
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