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Retail property rents to grow between 7% – 10% over next 2 years

Written by Robert McHugh, on 2nd Dec 2016. Posted in Ireland

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A new report from property consultants, Savills Ireland has found that retail property rents are entering a phase of slower growth. Nonetheless increases of between 7 and 10% are predicted over the next 2 years. 

The 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% 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 the second quarter 2018 while, in less prime markets, rents should rise by around 7%.

According to MSCI data, rental growth on Grafton Street eased from 21.8% per annum in the first quarter to 19.2% in the second quarter. However, rental growth slowed more sharply to 14.1% in the third quarter.
 
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.
 
Director of Research at Savills Ireland, Dr. John McCartney commented, "Rents in some prime shopping locations have already risen by more than a third over the last three years. 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."

Source: www.businessworld.ie

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