Luck of the Irish
Posted by Retail Week on 24th Feb 2017
Despite a snap election at Starmont announced just weeks into the new year and Theresa May’s 12-point Brexit plan doing little to shed light on the future of its border with the Republic of Ireland, Northern Ireland’s retail property market is buoyant with strong demand from both retailers with an established presence and new entrants.
While the post-Brexit trading situation between Norther Ireland and the Republic is extremely unclear despite May outlining the need for a “common travel area” between the two countries, Northern Ireland has seen benefits from Brexit with the weak pound luring shoppers over the border.
According to the latest market report from Savills Northern Ireland, this has boosted footfall by as much as 40% like for like for new retailers in the border towns of Newry, Enniskillen and Londonderry. This is echoes by Richard Hutchinson, associate director of asset management at Ellandi, owner of the Erneside Shopping Centre in Enniskillen and Bloomfield Shopping Centre in Bangor.
“The fall in the pound has had a beneficial impact on the border towns,” agrees Hutchinson. “Erneside, for example, has seen an upstick of footfall of 11% in the past six months, which can partially be attributed to the fall in the pound.”
It is not thought, however that the currency fluctuation will bring any additional investment in Norther Ireland. Jonathan Millar, managing director of property services company Colliers International in Belfast, believes the boost will more likely ensure retailers already in the border towns decide to renew leases. It may also possibly encourage those brands already in the country to open one or two additional outlets.
“I don’t think any occupiers would make a business decision based on a currency differential,” he adds. “It’s a bonus, not something a considered board would use to make a decision on whether to move into a new country.”
Regardless of currency issues there is already plenty of interest in Northern Ireland from both established retailers and new entrants. At present, interest is primarily focused on Belfast and, according to Savills report, retailers take-up in the city is at its strongest for many years with interest no longer focused solely on the prime sites.
New retailers opening in Belfast over 2016 include toy retailer The Entertainer, menswear chain Moss Bross and Danish lifestyle retailer Sostrene Grene. Demand is also strong from food and beverage chains, with new entrants including Patisserie Valerie and Zizzi.
The resurgence of Belfast centre, which had been impacted by the launch of high-end shopping destination Victoria Square just off the city centre in 2008 and the economic downturn, has gained momentum over the past 18 months to two years largely due to a significant rates reduction introduced in April 2015. This led to a 30% reduction in most locations.
According to Ian Henton, director of retail leasing at Lambert Smith Hampton, no transitional relief in Northern Ireland meant savings went straight on to the bottom line for retailers. “It was a significant step,” he adds.
“There had been no review since around 2002 or 2003 so rates were historic and completely out of kilter. Aldo [the footwear chain] had put their store on the market prior to the review but they took it off and reopened afterwards. It gave the retail market a shot in the arm.”
This is borne out of the vacancy rates both in Belfast and across the country as a while, adds Hutchinson, who points to the figures from property consultants Lisney Belfast that show prime vacancy in Belfast fell to 10.5% last year from 12.5% in 2015. Across Northern Ireland, prime vacancy rates dropped from 14.6% to 13.8% over the same period.
Rents, which had dropped by around 50% since 2007, are creeping back up, says Colin Mathewson, senior director of the retail agency at consultancy CBRE. “Our prime rental rates were around £275-£280 per sq ft in 2007 but had fallen to £100-£125 since then.
This is now creeping back up.” This is reinforced by the Savills report, which states Zone A rents are now at £150 per sq ft for prime Belfast city centre units – up 20% on the year. Paul Wilson, director of the retail at Savills Northern Ireland, adds that lease lengths are now up to 10 years on some locations. “We had seen a few years where many lettings were pop-ups, so it is good to see retailers looking long term and investigating. It is transforming the appearance of the city centre.”
With no new major schemes in the pipeline across the whole country, new space is very much limited to small pockets. In Belfast, this includes Primark’s 32,100 sq ft extension to its flagship store; the redevelopment of Donegall Place by consortium Ashmour, which will create 37,000 sq ft of retail space; and the mixed-use scheme at the Royal Exchange by Castlebrook Investments, which is still in planning.
Focus instead is very much on asset management with landlords looking to extend, reconfigure, modernise and refurbish existing centres, according to Nick Symons at property consultants MMX Retail, who is currently seeking new units in Northern Ireland for beauty retailer The Body Shop and a first store for Australian stationer Smiggle.
“There is a lot of interest in the Northern Ireland market, especially from established retailers who are revisiting the opportunities,” adds Symons. “This is driving a lot of asset management on schemes across the region.”
The Rushmere Shopping Centre in Craigavon, which has extended to accommodate the “big space takes” such s fashion anchor Next, has led the way in the area. The centre, which is currently adding two new restaurant units due to open this spring, is now fully let with several existing tenants also modernising their stores.
According to the Savills market report, there is much activity under way or poised to begin across the country. These include completed extensions at Forestside in South Dublin and the Abbey Centre in Newtonabbey to create additional retail space. The latter now boasts a 43,000 sq ft dual-format Next and a 32,000 sq ft Dunnes store.
Meanwhile, Ards Shopping Centre in Newtonards completed a £7m refurbishment last year with new tenants including value fashion chain TK Maxx, B&M Bargains and JD Sports. Plans to bring the first John Lewis to Northern Ireland at Sprucefield also received a boost before Christmas when the High Court lifted a bulky goods restriction only on the area.
Construction has started at the Quays in Newry on an extension to create 100,000 sq ft of new retail and leisure space. Meanwhile, the well-established Fairhill Shopping Centre in Ballymena is enhancing its tenant mix with newcomers including Greggs and stationer The Works.
Ellandi’s Bloomfield Shopping Centre in Bangor has also received new investment and completed new lettings, again to Next buy also Specsavers and Superdrug. There are plans for further development of the centre.
“We have experienced very strong demand from retailers with several cases of competitive bids for units,” says Hutchinson. “I don’t think Norther Ireland needs new centres, instead redevelopment spaces and modernising existing retail centre space to meet modern retailers requirements is key.”
These positive trends are reflected in the out-of-town market with lower vacancy levels and rent increases in some locations, according to Savills. The furniture retailers are dominating this sector driven by an improving housing market. This has seen Irish retailer EZ Living open its first Northern Ireland store on Shane Retail Park on Belfast Boucher Road, where a deal is also thought to be imminent on the former B&Q store. Sports Direct is touted as the front runner.
Meanwhile, homewares retailer The Range opened its first Northern Ireland store in the former B&Q outlet on Braidwater Retail Park Ballymena, and has also signed a lease for 45,000 sq ft split of the former B&Q in Derry.
With the new £250m University of Ulster campus in central Belfast bringing 15,000 students and staff, much of the lettings activity is expected to remain on Belfast over 2017. However, the booming tourist economy across Northern Ireland will not only reinforce the demand in the capital buy help to drive it across the country.
With retailers including H&M-owner Inditex, US lingerie brand Victoria’s Secret and flooring chain Tapi among the many that are known to be seeking locations, the signs remain positive for Belfast despite the political uncertainty.
“All the fundamentals are strong and the market continues to move forward,” says Henton. “And there are still plenty of brands that haven’t made the decision to come yet.”