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Irish Shopping Centres and Retail Parks: A Stock AnalysisSPRING 2013

2 IRISh ShOPPING CENTRES AND RETAIL PARKS: A STOCK ANALySIS | Spring 2013

Irish Shopping Centres and Retail Parks: A Stock Analysis

The following report provides an overview of the performance of the Irish retail market; specifi cally the Irish shopping centre market and the Irish retail park market.

The report commences with an overview of the general economic environment in Ireland together with an overview of the investment conditions in the retail property market.

Additionally, a detailed analysis of the Irish shopping centre market is provided in terms of the size of the market on a county by county basis, the gross lettable area per thousand of the population in each location and the classifi cation of the top shopping centres on the basis of key criteria; size, population density, access to transport and the presence of leading retailers.

The fi nal section of the report provides an overview of the Irish Retail Park Market in terms of market size and density levels on a regional basis.

RegionDensity (Per ‘000 of Population) Size Rating

Dublin Dundrum Town Centre Very Large AAA++

Dublin The Blanchardstown Centre Large AAA+

Dublin The Square Town Centre Large AAA+

Dublin Liffey Valley Shopping Centre Large AAA+

Dublin The Pavilions Shopping Centre, Swords Large AAA+

Mid-West Crescent Shopping Centre, Co. Limerick Medium AAA

Dublin Jervis Shopping Centre Medium AAA

Mid-East Navan Town Centre, Co. Meath Medium AAA

Mid-East Whitewater Shopping Centre, Kildare Medium AAA

Dublin Omni Park Shopping Centre Medium AAA

Table 1

Ireland’s Top Shopping Centres - 2013

Source: DTZ Sherry FitzGerald Research

Figure 1

Retail Sales Volume Growth by Sector 2012 (annual % change)

Economic Overview

Source: CSO

Growth in 2013 will continue to be driven by the external environment; however the recovery is also dependent on a resumption of consumer spending. Despite high unemployment, on-going fiscal austerity and deleveraging of debt, domestic demand has shown signs of stabilisation. Preliminary figures from the Quarterly National Accounts (QNA) for quarter three reveal encouraging signs of a tentative recovery in domestic demand, rebounding from a sharp contraction during the second quarter. Two of the three components of domestic demand, consumer spending and investment spending, recorded growth in the three month period. In particular, a significant increase of 8.5% in investment spending was the main driver of the increase in domestic.

Consumer spending also recorded a quarterly increase rising by a modest 0.5% during the three month period; this compares to a 0.1% decline recorded in the previous quarter. The Department of Finance forecast consumer spending to contract by 2% in 2012 while a more moderate contraction 0.5% is forecast for 2013.

Furthermore Irish consumer sentiment, although weak, improved in 2012 relative to 2011. Latest results from the KBC Bank Ireland/ESRI Consumer Sentiment Index for January 2013 reveal that Irish consumer sentiment rebounded to a five-month high to 64.2 from a sharp fall December. The lift in the index in January possibly reflects short term indicators such as post budget digestion and the January sales. The index may be subject to some fluctuation in the coming months, particularly in relation to the impact of the looming property tax.

The Irish economy has endured a volatile journey over the past four to five years but an element of stability has begun to emerge. As recently as the beginning of 2012, the outlook for the economy was largely uncertain stemming from external pressures; in particular the euro zone financial crisis. However, as the year progressed a combination of policy initiatives implemented at both EU level and domestically resulted in tentative signs of stabilisation emerging in the economy.The outlook for 2013 is now relatively optimistic as the Irish economy continues its course towards economic recovery. That said fragilities remain; in particular, slowing economic growth in the UK and the Euro area continues to pose downside risks to the

growth outlook.

Overseas confidence in Ireland has improved considerably, boosted by the long-awaited deal with the ECB to restructure a costly promissory note into less expensive sovereign debt. The landmark deal should see Ireland regain its funding independence, by increasing its chances of exiting the bailout programme and re-entering the

financial markets by year end. On a further positive note, both Standard & Poor and Fitch have upgraded Ireland’s sovereign debt rating outlook from negative to stable.

While final growth figures for 2012 are not yet available; the Department of Finance have forecast that the Irish economy will achieve modest growth of less than 1% in 2012, before gradually improving to 1.5% in 2013.

The outlook for 2013 is now relatively optimistic as the Irish economy continues its course towards economic recovery

Spring 2013 | IRISh ShOPPING CENTRES AND RETAIL PARKS: A STOCK ANALySIS 3

Figure 2

Retail Quarterly Total Return & Equivalent yield

Economic Overview Retail Property Performance

Source: IPD

The volume of retail sales declined at an annual rate of 1.1% in 2012

The first six months of 2012 witnessed mixed performance in retail sales across all sectors. however, the latter part of the year saw signs of stabilisation emerge in line with improvements in sentiment which resulted in an uplift in retail sales. however, this was short-lived as the final two months of the year saw a contraction in retail sales, which was most likely stemming from

Budget 2013 expectations. For 2012 as a whole, the volume of retail sales declined by 1.1% when compared with the same period in 2011. however, when motor trade figures are excluded, annual data reveals that headline sales grew by 1%.

Despite a strong rebound in consumer sentiment in January, the latest figures from the Central Statistics Office (CSO) reveal that retails sales were weaker than expected in January 2013. The volume of retail sales fell by 1.7% on a monthly basis thus marking the third consecutive monthly decline. When motor trades are excluded, sales were down 1.4% on December. The results are a reflection of the impact of Budget 2013 on household disposable incomes; in the manner of changes to PRSI allowances and reductions in social benefits.

The latest data from the Investment Property Databank (IPD) reveals that 2012 marked the first annual positive return for the Irish market since 2007. According to IPD, total return for 2012 stood at 3.1%, boosted by strong income returns of 10.1%. Capital values on the other hand continued to decline during 2012, albeit at a much reduced rate. Capital values fell by 6.4% during the twelve month period; while remaining in negative territory it compares favourably to a reduction of 11.4% in 2011.

The retail sector, which remains susceptible to adverse economic developments, continued to struggle during 2012. The latest IPD figures reveal that total return weakened during the latter half of 2012 and as a result, registered a return of just 0.5% for the year as a whole. This is compared to returns of 4.9% and 4% for office and industrial property respectively during the period.

The quarterly income return for retail was steady during the year with 8.8% recorded for the year as a whole. The retail sector suffered the strongest sector decline in capital values falling by 7.6% in 2012. This brings the cumulative decline in capital values to -71% since the peak in December 2007.


RegionDensity (Per ‘000 of Population)

Border 439

Dublin 623

Mid-East 292

Midlands 503

Mid-West 399

South-East 423

South- West 282

West 258

State 432

Table 2

Regional Shopping Centre Density Levels

Figure 3

Distribution of Shopping Centres in Ireland, 2013




After more than a decade of robust expansion, construction activity in the Irish shopping centre market has declined notably in the past five years. 2012 marked the first calendar year since 1966 when no shopping centre development occurred in the entire country. Ireland’s first shopping centre opened in 1966 in Stillorgan, Co. Dublin and since then the stock of shopping centres in Ireland has risen to 1.98 million sq m as of December 2012. This equates to an average of 432 sq m of shopping centre accommodation per thousand of the population in the state in 2012. however, across the regions, the spread of accommodation relative to the population ranges from 258 sq m in the west to 623 sq m per thousand in Dublin.

There are currently 202 purpose-built shopping centres in Ireland, with the majority of centres not surprisingly located in

the east of the country. Dublin alone accounts for 64 of the nation’s shopping centres, equating to 32% of the overall stock nationally. In contrast to this, counties in the west and midlands have the lowest number of shopping centres, with only one shopping centre in a

number of counties such as Cavan, Leitrim and Roscommon. That said, this analysis is based on a local definition of a shopping centre. In contrast, if the European definition of a shopping centre is applied, the number of developments within this definition falls by 80 to 122.

Under the European definition, a shopping centre must be at least 5,000 sq m. Applying this locally, the national total Gross Lettable Area (GLA) falls to 1.72 million sq m as 40% of the countries shopping centres are less than 5,000 sq m. Not surprising, Dublin remains the best supplied county, with a GLA of 711,998 sq m. Conversely, other counties find that under this definition their centres would not meet European standards.

The adjoining map illustrates the number of shopping centres in line with the European definition of a shopping centre. The majority of the centres around the country are defined “small” by the European definition. Dublin is the only county with a “large” shopping centre. Furthermore, the Dundrum Town Centre in Dublin is the only centre in Ireland to be deemed “very large” by European standards, with a GLA of approximately 85,300 sq m.

DTZ Sherry FitzGerald Research has undertaken a comprehensive analysis of all the shopping centres with a lettable floor area of greater than 10,000 sq m across all twenty-six counties. The study assesses and classifies the retail centres into five key rankings AAA++, AAA+, AAA, AA and A. The ranking is based on a number of key criteria such as size, population density, access to transport, the presence of leading retailers & brands and food/entertainment services.

Under the European definition, a shopping centre must be at least 5,000 sq m. Applying

this locally, the national total Gross Lettable Area (GLA) falls to 1.72 million sq m as 40% of the countries shopping centres are less than 5,000 sq m.

Dublin accounts for 32% of the overall stock nationally

Shopping Centre Market

Louth

Monaghan

Dublin

Meath

Cavan

Westmeath

Kildare

Laois

Carlow

Wicklow

WexfordKilkenny

Waterford

CorkKerry

Limerick

TipperaryNorth

Offaly

Tipperary South

Clare

Galway

MayoRoscommon

Sligo

Longford

Leitrim

Donegal

3024

2121

2 5 1

1

Irish Small: <5,000 Sq m

European Small: 5,000 - 19,999 Sq m

European Medium: 20,000 - 39,999 Sq m

European Large: 40,000 - 79,999 Sq m

European Very Large: 80,000 Sq m +

43

11

1

1

2

3

73

132

2 1 1

4 26

45 1

5

1

2

2

1

4 1

2411

23 2

106 13

6 1

2 3

1 1

5 2

1

1

2

Louth

Monaghan

Dublin

Meath

Cavan

Westmeath

Kildare

Laois

Carlow

Wicklow

WexfordKilkenny

Waterford

CorkKerry

Limerick

TipperaryNorth

Offaly

Tipperary South

Clare

Galway

MayoRoscommon

Sligo

Longford

Leitrim

Donegal

3024

2121

2 5 1

1

Irish Small: <5,000 Sq m

European Small: 5,000 - 19,999 Sq m

European Medium: 20,000 - 39,999 Sq m

European Large: 40,000 - 79,999 Sq m

European Very Large: 80,000 Sq m +

43

11

1

1

2

3

73

132

2 1

4 26

45 1

4

1

2

2

1

5 1

2411

23 2

106 13

6 1

2 3

1 1

5 2

1

1

2

Table 3

Ireland’s Top Shopping Centres - 2013

RegionDensity (Per ‘000 of Population) Size Rating

Dublin Dundrum Town Centre Very Large AAA++

Dublin The Blanchardstown Centre Large AAA+

Dublin The Square Town Centre Large AAA+

Dublin Liffey Valley Shopping Centre Large AAA+

Dublin The Pavilions Shopping Centre, Swords Large AAA+

Mid-West Crescent Shopping Centre, Co. Limerick Medium AAA

Dublin Jervis Shopping Centre Medium AAA

Mid-East Navan Town Centre, Co. Meath Medium AAA

Mid-East Whitewater Shopping Centre, Kildare Medium AAA

Dublin Omni Park Shopping Centre Medium AAA



Only five centres or 9% of the entire stock of shopping centre space nationwide is classified as AAA+ or higher


Results from the study reveal that only five centres or 9% of the entire stock of shopping centre space nationwide is classified as AAA+ or higher. Furthermore, the accompanying figure 3 illustrates the spread of these centres by grade and in particular highlights the disparities that exist in relation to the distribution of shopping centres across the country in terms of both quality and quantity.

The Dundrum Town Centre has been identified as Irelands leading standalone shopping centre and the only centre to be awarded AAA++ status. The Dundrum Town Centre’s unique tenant line-up such as house of Fraser, harvey Nichols, hamleys

and hollister along with its location and accessibility to transport contribute to its high ranking. The Blanchardstown Centre, The Square, Liffey Valley and Pavillions make up the rest of the top five centres and the entire “Large” category; all of which attained AAA+ status. Furthermore in terms of market performance in Dublin, these five centres are proving to be the most resilient and continue to achieve new lettings.

Dublin provides the highest provision of shopping centres of the major cities, accounting for 38% of all the graded centres. Furthermore, all of the larger grade AAA++ and AAA+ centres are located in the capital. At the opposite end of the spectrum, Galway has the lowest provision of space of the major cities with the highest graded shopping centre at AA.

Figure 4

Irish Shopping Centres >10,000 Sq M by Grade - 2013


NAMA have announced proposals to invest up to €2 billion in Ireland over the next four years

In the 20,000-39,999 sq m size category of retail centres, the Crescent Shopping Centre was the top performing centre, closely followed by the Jervis Shopping Centre and the Navan Town Centre. Mahon Point shopping centre in Cork was the highest ranking shopping centre in the 5,000-19,999 sq m size category.

There will be limited new development in 2013 and beyond. Convenience and discount retailers, which would include Tesco, Aldi and Lidl, will continue to be active in the market and will frequently develop their own stores. The National Asset

Management Agency (NAMA) have announced proposals to invest up to €2 billion in Ireland over the next four years to complete commercial and residential projects and to develop future Greenfield sites. One of the beneficiaries of this investment will be the developers of the Charlestown Shopping Centre in Finglas, North Dublin who have secured funding of €12 million from NAMA. Construction is due to commence on a new cinema complex.

Rents are beginning to stabilise in the best retail locations and this trend will continue as the economy improves in 2013 and consumer sentiment and retail sales start to increase. Rental growth will feature in prime locations first, but many secondary and tertiary locations will continue to experience high vacancy levels and static or falling rents.


AAA++

AAA+

AAA

AA

A

Shopping Centre Grade 2013

Louth

Monaghan

Dublin

Meath

Westmeath

Kildare

Laois

Carlow

Wicklow

WexfordKilkenny

WaterfordCork

Kerry

Limerick

TipperaryNorth

Offaly

Tipperary South

Clare

Galway

Mayo Roscommon

Sligo

Longford

CavanLeitrim

Donegal

3

4

8 5

1

1 1

4 2 1

1

2 1

1

1

11

1

11 1

2 1

12

1 2

2 1

1

AAA++

AAA+

AAA

AA

A

Shopping Centre Grade 2013

Louth

Monaghan

Dublin

Meath

Westmeath

Kildare

Laois

Carlow

Wicklow

WexfordKilkenny

WaterfordCork

Kerry

Limerick

TipperaryNorth

Offaly

Tipperary South

Clare

Galway

Mayo Roscommon

Sligo

Longford

CavanLeitrim

Donegal

3

4

8 5

1

1 1

4 2 1

1

2 1

1

1

11

1

11 1

2 1

12

1 2

2 1

1


Figure 5

Distribution of Irish Retail Parks - 2013


There are large disparities in the spread of accommodation across counties

Retail Park Market

Similar to the shopping centre market, development activity in the retail park market slowed notably since the onset of the downturn more than five years ago. Construction activity in the retail park market ceased in 2009; since then, no new space has commenced construction and no new developments starts are scheduled at present. The total stock of retail park space stood at 1.17 million sq m at the end of 2012.

An analysis of the total stock of retail park accommodation reveals that 24% was located in the Dublin region. A further 8% was located in Limerick with 7% in Cork and 4% in Galway. There are large disparities in the spread of accommodation across counties, for example, Louth had a greater proportion of retail park space than the three regional centres at 8.4%. Furthermore, an analysis of the level of

retail park space per thousand of the population reveals some interesting trends. In particular, based on Census of Population figures, Carlow had the largest proportion of retail park space per thousand of the population at 908 sq m. This was closely followed by Louth with 804 sq m per thousand and Sligo with 702 sq m per thousand. The average level for the State stood at 256 sq m at the end of 2012. Dublin was slightly below this ranking with 224 sq m per thousand of the population.

An analysis of the spread of retail park space across the regions is more informative. From this analysis, the border region has the largest stock of retail park accommodation relative to the population, with 382 sq m per thousand. This is significantly ahead of the other regions and the State. The lowest was in the South-West region with 158 sq m per thousand of the population.

In terms of the profile of retail park space, there are currently 113 retail parks in Ireland. Just over 20% of the parks are located in Dublin; a further 9% are located in Cork and 6% in Limerick.

Louth

Monaghan

Dublin

Meath

Cavan

Westmeath

Kildare

Laois

Carlow

Wicklow

WexfordKilkenny

Waterford

CorkKerry

Limerick

TipperaryNorth

Offaly

Tipperary South

Clare

Galway

MayoRoscommon

Sligo

Longford

Leitrim

Donegal

119

11 12

5

3

Small: <10,000 sq m

Medium: 10,000 - 20,000 sq m

Large: 20,000 - 30,000 sq m

Very Large: >30,000 sq m

1

21

2

3

1

1

1

14

4

1 31

2 1

3

2

1

1

1

1

11

11 5

7 32 1

2 4

2

2

2

2

33

Louth

Monaghan

Dublin

Meath

Cavan

Westmeath

Kildare

Laois

Carlow

Wicklow

WexfordKilkenny

Waterford

CorkKerry

Limerick

TipperaryNorth

Offaly

Tipperary South

Clare

Galway

MayoRoscommon

Sligo

Longford

Leitrim

Donegal

119

11 12

5

3

Small: <10,000 sq m

Medium: 10,000 - 20,000 sq m

Large: 20,000 - 30,000 sq m

Very Large: >30,000 sq m

1

21

2

3

1

1

1

14

4

1 31

2 1

3

2

1

1

1

1

11

11 5

7 32 1

2 4

2

2

2

2

33

RegionDensity (Per ‘000 of Population)

Border 382

Dublin 224

Mid-East 234

Midlands 239

Mid-West 301

South-East 311

South- West 158

West 281

State 256

Table 4

Regional Shopping Centre Density Levels




Outlook for the future

The Irish economy has come a long way over the past five years and while recent economic indicators have been largely positive, the recovery remains strained by prevailing uncertainties such as a slowdown in world trade. The economy is estimated to grow by 1.5% in 2013, however as domestic demand remains fragile it may be some time before the true impact is witnessed in the retail market.

In the shopping centre market, demand remains concentrated on the larger centres with a particular focus on the higher grade shopping centres. As a result, these locations are experiencing greater demand with vacancy rates remaining low. The performance of secondary and tertiary retail is location specific, with poorly located and inadequately designed developments nationwide proving the least attractive for occupiers.

In the retail park market, trading conditions remain challenging. The strength of expansion in the retail park market from 2004- 2007 coincided with strong performance in the Irish residential market and subsequent growth in consumer expenditure. Similarly, stability is expected to return to the retail park market in line with an emerging stability in the housing market. On a positive note, the housing market and in particular the Dublin market appears to have turned a corner in 2012 and as such the retail park market is expected to experience a similar trend.

About DTZ Sherry FitzGeraldDTZ Sherry FitzGerald is the sole Irish affi liate of DTZ, a UGL company, a global leader in property services. With Irish offi ces in Dublin, Cork, Galway, Limerick and an associated offi ce in Belfast, we are the largest commercial property advisory network in Ireland and are part of Sherry FitzGerald Group, Ireland’s largest real estate adviser. We provide occupiers and investors around the world with best-in-class, end-to-end property solutions comprised of leasing agency and brokerage, integrated property management, capital markets, investment, asset management and valuation. DTZ has 47,000 employees including sub-contractors, operating across 217 offi ces in 53 countries.

www.dtz.ie

© 2013

AUThORSMarian FinneganChief Economist, Director Research+353 (0) 1 237 6341marian.fi [email protected]

Siobhan MoloneyResearch Manager+353 (0) 1 237 [email protected]

Karl Stewart Director of Retail+353 (0) 1 639 [email protected]

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