Smiley face or sad face? Panellists at Estates Gazette’s Retail & Leisure Talks debate at Completely Retail Ireland last week had to choose an emoticon to describe their views on the prospects for the Irish retail market in 2016. The results were mixed.
For Karl Stewart, director and national head of retail at DTZ Sherry FitzGerald, it was a definite smiley face.
“Last year we saw occupiers returning to the market in greater force. We saw the volume of deals open up. This year has seen that momentum increase,” he said. “There are a number of retailers that want to open new stores and that’s the key thing.”
“We are being realistic,” added Turlough Flynn, commercial director at Chartered Land. “There is good news out there in the Irish economy. Retailers are seeing an increase in spend and money in the till is going to help from a landlord’s perspective to drive rents and from a retailer perspective to help them grow.”
Talk of rental increases quickly drew a word of caution from Cormac Kennedy, group head of property and franchise at bookstore chain Eason, however. He said wholesale increases would soon dampen some of the fresh demand being seen in the Irish retail market.
“While things are marginally better than they have been for the past few years, you can’t ignore the fact that we have had such a boom to bust – and more so than most other built economies. We are still trading at 14% off the peak in terms of what sales were,” said Kennedy. “While it is good to be positive, we need to be very cautious in terms of that optimism. Retailers that managed to survive the downturn are now beginning to see a bit of light, but I would be slightly nervous about killing the golden goose just as it is beginning to get fat.”
And that seemed to be a theme among the panellists. While the market is starting to recover from the recession, it is far from a boom yet.
“There is no doubt that Ireland has done very well over the last couple of years in terms of economic growth,” said New River Retail property director Allan Lockhart. “There is more confidence coming through into the consumer markets, but there are genuine risks and they need to be properly evaluated.”
He pointed to a volatile economy, high government and household debt, a reliance on corporation tax and the country’s relationship with its three main trading partners – the US, UK and Europe – all of which have their own economic risks.
For Kennedy, the risks for retailers in 2016 and beyond were firmly aligned with costs.
“Retailers are going to have to keep a very close eye on their cost base,” he said. “The fear retailers have is that there is going to be attrition over the next few years between landlords and tenants over rents, where landlords feel they haven’t seen much, if any, rental growth in the past few years and now see an opportunity to get that back. For retailers, they are not going to give in on that too soon because retail sales have not hit the levels they should have hit to support rental increases.”
But while caution around costs and not getting overly optimistic dominated much of the discussion, potential threats from online retailing, the investment market, landlord and tenant relationships and the rise of leisure also peppered the conversation.
“The big change in retail has been the addition of leisure,” said Kennedy. “It has increased dwell time and customer engagement and we are investing back into our shops to improve that. That is ultimately what retail is all about. It is a leisure pursuit. You don’t have to go shopping.”
Chartered Land’s Flynn agreed. He said that a decade ago the tenant mix in its schemes was 6-8% food and beverage operators, today it is closer to 18-20%.
“It is becoming a huge part of the business. Schemes are trading seven days a week from early morning until late at night,” he said. “When we develop a scheme now, we are not developing a shopping centre, we are developing a town centre that is going to trade into the night.”
New River Retail’s Lockhart claimed it was a leisure offering that separated prime from secondary shopping centres in the real sense of the words, rather than the real estate community definitions. To him secondary was really convenience, those shopping outlets where consumers spend their core weekly budget. Prime was those centres, such as Dublin’s Dundrum, where consumers choose to spend a whole day.
“Consumers arriving at those centres don’t really know what they are going to spend their money on, so your whole approach has to be different,” said Lockhart. “It has got to be much more experience-driven and theatrical. It has got to create that emotional connection with the consumer if you want to prize that pound out of their pocket and into your store.”
And that pound – or euro – is there to be spent.
“I continue to be optimistic,” concluded Flynn. “I do think the Irish economy is picking up. There are lots of issues out there but at the end of the day we have to look at our own fundamentals. There is, and always has been, a lot of money in Ireland and people are beginning to spend that again. We are starting to see that in the tills and that can only be good news.”
The panel
Karl Stewart, director and national head of retail,
DTZ Sherry FitzGerald
Allan Lockhart, property director, New River Retail
Cormac Kennedy, group head of property and franchise, Eason
Turlough Flynn, commercial director, Chartered Land
Paul Anderson, director of operations, NI, Omniplex
Chaired by Samantha McClary, head of content, Estates Gazette
