Retailers facing 10pc hike in rents

Property agent Savills Ireland is predicting rises of 7pc to 10pc for retail property rents by 2018, notwithstanding the recent slowdown in the sector.

Savills’ latest quarterly Market in Minutes Ireland Retail report says a “notable softening” in short-term indicators, including retail sales, VAT receipts and consumer sentiment, is driven by economic and political uncertainty caused by Brexit and the US election as opposed to any underlying weakness in the Irish economy.
Savills research suggests however that employment is by far the strongest leading indicator of retail rents in the long run. With jobs growth of 2.9pc recorded within the last year, Savills believes retail rents will continue to rise – albeit at a slower pace.

The report forecasts rental growth of just under 10pc for Grafton Street by the second quarter of 2018. Rents in less prime locations are predicted to increase by approximately 7pc.
According to MSCI data, rental growth on Grafton Street slowed from 21.8pc per annum in the first three months of 2016 to 19.2pc in the second quarter. Savills’ prediction in its econometric model that rental growth would slow more sharply in the three months to the end of last September to 14.1pc came close to the actual 13.9pc outcome.

“Rents in some prime shopping locations have already risen by more than a third over the last three years,” Savills Ireland Director of Research, Dr John McCartney said of the recent decline in retail rental growth.
“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.”

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