The Consumer Sentiment Index dropped from 96.5 to 90.9 over the first half of this year (Source: ESRI/KBC). This is against a backdrop of growing e-commerce sales & retail company administrations, escalated by economic uncertainty. 

While all of this is very relevant, there is something of a disconnect between the UK and Ireland experiences.  Although Ireland will undoubtably suffer indirectly as a result of Brexit, it has not been subject to the same direct consequences of the uncertainty it has created in the UK over the last three years. GDP in Ireland grew by 8.2% in 2018 and is forecasted to rise by a further 4.2% in 2019. Average weekly earnings are up, employment levels have reached record levels, approaching full employment, and Irish retail sales have continued to trend upwards as a result.

Overall, there is a trend of growth in e-commerce purchases by individuals, however, there are large differences between countries’ online spending patterns. In 2018, 77% of individuals in the UK had made an online purchase within the last three months of being surveyed. This compares to just 52% in Ireland. (Source: Eurostat)

In the UK, 27 companies have failed in 2019 (to June) affecting 932 stores and 32,257 employees (Source: Centre for Retail Research). These include household names like Debenhams, Pretty Green, L K Bennett, Gerry Weber & Patisserie Valerie. Notably none of these household names are Out of Town / Retail Park operators. In fact, of all 27 to have failed in 2019 (to June), fewer than 15% would be considered Out of Town / Retail Park operators.

Retail parks in Ireland are performing particularly strongly. While shopping centres & the high street are also performing well, particularly in spite of the uncertainty of the likes of House of Fraser, New Look & Arcadia, Ireland’s top 3 retail parks (Carrickmines, Blanchardstown & Airside) are enjoying 100% occupancy. The MSCI (IPD) rental series show +6.5% y/y rental growth in the retail warehousing sub-index, compared with -1.7% y/y on Grafton St., -4.8% Henry St. and +1.5% retail overall.

IPUT, the longest established commercial property fund in Ireland and the largest owner of office buildings in Dublin, acquired Phase 1 of Carrickmines in 2014. It further acquired Phase 3 of Carrickmines in 2015 which is currently in planning to include a further 120,000 sq ft of retail warehouses. They finally assembled the entire retail park earlier this year through the acquisition of Phase 2. This July they acquired the fully occupied Mahon Point Retail Park in Cork, bringing the total amount of retail in their portfolio to 20%. This is quite a vote a confidence in the Irish Retail Market, specifically the retail park market, by Dublin’s largest owner of office buildings.

This begs the question, “Who is occupying this retail warehouse space in Ireland?”. The below graph shows annual retail sales & price growth, plotted by sector:

What this shows is that Electrical & Furniture are experiencing the greatest growth in sales volume, with Hardware coming a close fourth; three traditional retail warehouse categories. In essence, the recovery in housebuilding is driving the strength of the retail warehousing sector. The number of new dwelling completions have increased year on year over the last four years to Q1 2019 (Source: CSO).

Danish home retailer Jysk is planning to open 20 stores and create 200 jobs across Ireland over the next two to three years. The company opened in Naas in April with Drogheda, Navan and Portlaoise to follow. French sports retailing giant Decathlon plans to open nine shops in Ireland over the next few years, beginning with a large outlet beside Ikea in Ballymun, north Dublin, where it has secured planning permission and will begin construction shortly.

Oak Furniture Land is seeking their first store in the Republic of Ireland but faces stiff competition from an already buoyant indigenous furniture sector. EZ Living Interiors, EZ Living Furniture & Michael Murphy Home Furnishings are all seeking to expand their existing presence. Finally, The Range are the ones taking advantage of the growth in sales volume in the hardware sector. The Range opened their first Republic of Ireland store in 2016 and have opened six more in the meantime. They also continue to be expansionary.

So where does the future of retail warehousing lie in Ireland? Well, with the traditional retail warehouse categories continuing to grow in sales volume, and new dwelling completions continuing to grow year on year, the demand side certainly shows no signs of slowing. And with Phase 3 of Carrickmines being the only sight of new retail warehouse development in Dublin, for which strong demand is expected, the supply side shows no signs of growing sufficiently either. I expect more retailers to take the same route as the likes of Jysk, opting for the regions over the capital, and to see secondary retail park occupancy levels to rise in line with the prime market.