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Retail Property Rents Predicted to Grow 7-10% Over Next Two Years

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Retail Property Rents Predicted to Grow 7-10% Over Next Two Years

Retail Property Rents Predicted to Grow 7-10% Over Next Two Years
December 05
14:20 2016

Retail property rents are expected to see increases of between 7 and 10 percent over the next 2 year,s according to a new report released by property consultants, Savills Ireland, on Friday December 2.

“Rents in some prime shopping locations have already risen by more than a third over the last three years,“ Director of Research at Savills Ireland Dr. John McCartney said. “As the retail economy transitions from its early recovery phase to a sustainable growth phase, base effects are inevitably going to dampen the annual percentage increase in rents.”

The report says that, according to MSCI data, rental growth on Grafton Street eased from 21.8% per annum in Q1 to 19.2% in Q2. However, as predicted by Savills’ econometric model, rental growth slowed more sharply to 14.1% in Q3.

Savills’ report identifies a notable softening in some short-term indicators such as retail sales, VAT receipts and consumer sentiment over the last year. However, rather than reflecting underlying weakness in the economy, Savills believes this derives from base effects and, perhaps, the temporary impact of political uncertainty on consumer confidence.

Looking through this turbulence, however, Savills research shows that employment is by far the strongest leading indicator of retail rents in the long run. With jobs growth of 2.9 percent in the last year retail rents are therefore expected to continue rising – albeit at a slower pace. Savills econometric model forecasts rental growth of just under 10% in Grafton St. by Q2 2018 while, in less prime markets, rents should rise by around 7%.

Commenting on the latest retail trends, Larry Brennan, Director of Retail at Savills Ireland said that demand from international retailers remains strong, evidenced by the forthcoming openings of ‘& Other Stories’ and ‘Victoria Secret’ on Grafton Street, in addition to the new Top Shop flagship store in Jervis Shopping Centre. Smaller premium fashion and speciality stores are in large demand in the Dublin 2 area, whilst food lettings are also continuing throughout Dublin City centre with no sign of the pent up demand waning. The food sector has dominated the recent letting activity in the suburban malls with occupiers including Five Guys, Cosmo, Prezzo and Milano actively pursuing opportunities.

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