Overview
Trading in the retail sector remains tough. CSO figures show that the volume and value of retail sales decreased by 0.6% and 0.5% respectively in July 2011 compared to July 2010. When compared to four years ago (July 2007), they are down 19.6% and 24.1%.
The KBC/ ESRI index shows that consumer sentiment was relatively unchanged in August, standing at 55.8 compared to 55.9 in July. Whilst a figure above 50 illustrates some expansion, it is evident that consumer uncertainty has been undermined by the on-going crisis in the Eurozone. Consumers are scared to spend and those who can are hoarding.
Changing Face of Retail
International retailers are now taking advantage of lower rents and favourable lease terms to get a foothold in the Irish market. Interest is focused mainly on prime high streets and shopping centres. Whilst rents have fallen by on average 40% to 50% from the peak of the market, they are likely to stabilise over the coming months as operators take advantage of current conditions to secure space on flexible lease terms.
Some retailers continue to close unprofitable stores, but there have been a number of new entrants to the market and others are due to follow. Examples of new fashion retailers include Hollister, Republic, Name It, Forever 21, Abercrombie & Fitch and Anthropologie. Other fashion retailers are in expansion mode including Skechers, Mango and H&M.
Supermarkets
It was announced in July that the Musgrave Group plc had reached an agreement with the joint receivers of Superquinn on a purchase of the business. This was approved by the Competition Authority on the 28th September, which is good news for staff and customers of the supermarket chain. According to Kantar Worldpanel Grocery Market Survey (quarter to September 4th), the Musgrave Group will hold a 25.5% share of the Irish grocery market. This will push it ahead of Dunnes, which has a 22.9% share and slightly behind Tesco, which has a 27.9% share. The acquisition will particularly affect the Dublin area, where Musgrave currently accounts for 10% of the grocery sales.
This survey also illustrates that Aldi and Lidl continue to make a major impact on the market, posting sales growth of 26% and 7% respectively in the 12 months to July. According to the data, the discounters have a 10.7% share of the market based on grocery value. During the latest quarter, they have attracted 1.2 million households, up 23,000 on the same period in 2010. The average basket shop is €19.60, down 80c year-on-year. New store openings are driving their growth with Aldi planning to open six new stores before the end of 2011 as part of its expansion plans.
Elsewhere, the discount supermarket chain Iceland is understood to have identified several potential sites for the company’s expansion programme. It is reported that these locations include Clonmel, Athlone, Cork, Waterford and Carlow. AIM retail group, the company’s master franchise in Ireland, is seeking sites beside existing multiples or convenience stores. In general, this locational strategy is not seen as direct competition to larger operators.
Single price stores
Single price discount retailers are currently making up a large proportion of market activity as a result of expansion plans by a number of operators. UK retailer 99p Stores has just entered the Irish market and are trading as Euro 50 Stores. Their first Irish shop opened adjacent to Iceland in the Ilac Centre in early September. We understand that the company plans to open in a further 21 locations in Ireland over the next 12 months.
Rival UK company, Poundland, has also decided to enter the Irish market and plan to open four stores before the end of 2011. They trade under the name Dealz.
Long established Irish discount retailer, €uro 2 stores, are also in expansion mode. They recently opened their first store under a new retail concept of larger stores (Euro Giant) with a greater range of products in Northside Shopping Centre. A roll-out of further stores is planned for the coming months.
Availability
Availability on prime high streets and in core suburban shopping centres is reducing. Whilst it is difficult to track exact vacancy levels, we have sought to monitor prime retail units in the Dublin market where no trading is taking place, i.e. a “shutter count”. The Lisney Shutter Count is not designed to measure vacancy but is an analysis of closed and non-trading retail units that are classified as ‘unoccupied’ on the graph below. It includes units where a lease may be in place but are still unoccupied. It also includes units currently undergoing fit-out/ refurbishment. In addition, we have sought to provide an analysis of the retailer.
Shopping Centre Development
Lisney’s international alliance partner, Cushman & Wakefield has just released research on how European shopping centre development is set to rise once again. In 2012, Europe is expected to see 5.8 million sqm of new accommodation completed. Although development has been subdued in some countries for the past few years (Ireland included), improving retailer demand and concerns about potential shortages of prime space are contributing to expectations of a rise in development activity in many European countries.
Despite overall European improvement, matters are not so positive in Ireland and we do not expect to see any significant completions next year. Any shopping centre schemes that were in the pipeline are now on hold and are unlikely to proceed in the short to medium-term. There are a number of reasons for this. To start with, consumer sentiment and spending are at low levels. In fact, the amount of money taken in at the tills by retailers is now almost 24% less than in 2007. Any new retailers entering the market or those expanding are taking-up available space in existing centres. In addition, as a nation, Ireland is severely over-shopped. We have 356.7 sqm of shopping centre space per 1,000 of population. This compares to the western European average of 233.9 sqm, and our closest neighbours, the UK, at 264.5 sqm.
Main Streets Across the World 2011
Our alliance partners, Cushman & Wakefield also recently published their annual report titled ‘Main Streets Across the World’. This studies rents in the top 278 shopping locations across 63 countries. The report found that Grafton Street continued to fall in ranking among the world’s most expensive high streets in terms of rent and now lies in 15th position. This is a drop of two places from last year and ten places from 2008 when the street was at its most expensive and in 5th position. This brings Grafton Street back to a similar position in the rankings of the mid-1990’s.
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