Monday 21 May 2007

High rents on Grafton Street squeeze tenants out

Grafton Street is one of the world’s most expensive streets for retailers, and there been a slow but steady flow of businesses moving on in the past five years as rent reviews squeeze them out.

Cafe Java recently sold the lease of its outlet on South Anne Street, just off Grafton Street, for €1 million, due to escalating rents, while British retailer Jigsaw has sold its lease on Grafton Street to fashion chain Ted Baker for €1.4 million.

Other names to leave the street over the past couple of years include up-market menswear shop FX Kelly and boutique Pia Bang. One reason blamed for spiralling rents is that pension funds and other investors seek top rents regardless of the tenant.

Some retailers feel that this has resulted in the appeal of Grafton Street diminishing as mobile phone retailers and fast food shops – which are owned by highly profitable parent companies – increasingly dominate the thoroughfare.

However, it may be a case of killing the golden goose, as less choice and individuality on the street may ultimately lead to Grafton Street’s appeal to shoppers dying off.

But the street’s track record for rising rents may soon come to an end. One property insider noted that, while large British retailers say their Irish stores are top performers in terms of turnover, they are the among least profitable due to rent outlay and other costs.

As the economy slows down, British retailers may opt out of high-cost locations such as Grafton Street. ‘‘The level of spending might ease off, and if overseas chains shy away, that will put the brakes on,” said the source.

Marie Hunt, research director with commercial property firm CBRE, said while Irish and overseas retailers continued to look for expansion opportunities in Ireland, there had been strong resistance to increasing rental values – particularly from the Irish retailers – in recent months.

‘‘This comes on the back of some high-profile rent reviews in centres such as Blanchardstown, Jervis Street, Liffey Valley and the Pavilions in Dublin and the Crescent Shopping Centre in Limerick,” she said. Hunt said a growing number of rent reviews were going to arbitration.

‘‘We are confident the retail sector will continue to perform strongly in the months ahead against a backdrop of strong economic activity,” she said.

‘‘However, it would appear the pace of rental appreciation will be much tamer in future and schemes that quote realistic rents will, undoubtedly, fare best in this environment.”

Sunday Business Post

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