SPECIAL REPORT: Seeds of recovery starting to flower on high streets
DESPITE the stream of positive indicators that have emerged over the past year pointing to an improved economic landscape, the country’s main streets have largely failed to mirror that progression.
As employment figures improved; growth projections rose and exports hit record levels, the story on the ground in towns and cities remained stubbornly gloomier with retailers reporting only a marginal pick-up in business.
As the economy began to spark to life again, month after month consumer spending lagged behind.
A population saddled with mountainous household debts goes a long way to explaining the reason why.
Any improvement in workers’ personal finances are funnelled into an attempt to chip away at the anchor round their necks rather into main street tills.
To illustrate the point, the Central Statistics Office (CSO) reminded us recently that Irish mortgage holders are shouldering the greatest debt burden relative to the value of their home of any of their eurozone counterparts.
For those struggling to keep the banks off their backs and make ends meet this will come as little surprise. All of which has, of course, meant retailers have endured a particularly difficult time and, for as long as consumers aren’t actually consuming very much at all, are likely continue to do so.
That said, recent reports would seem to suggest the seeds of recovery are beginning to flower in some areas.
In the last six months, retail vacancy rates improved on prime shopping streets in six major urban centres including Dublin, Limerick and Sligo, according to commercial real estate company CBRE.
To CBRE retail director Simon Cooper, this is evidence of a gradual improvement that has quietly taken hold in the past year or so.
“What we’ve really witnessed over the third and fourth quarters of 2014 and certainly the first quarter of 2015 [is that] there’s definitely a much better sentiment in the retail sector that’s really in line with, not only the consumer sentiment, but also the broader economic environment; falling unemployment and that is all now starting to translate into improving retail sales.
“That is starting to have an impact in terms of the take-up countrywide on the prime retail high streets and shopping centres. There’s just been a slow and steady recovery as we’ve moved out of the crash.”
Certainly, Limerick’s retail environment would seem to back that sentiment up with a string of heavy hitters including Costa Coffee, Tiger, and Ecco Shoes giving the city centre a much-needed shot in the arm and reducing prime vacancy rates from one of the highest in the country last autumn, at 18.6%, to 14%.
The same period also saw an improvement in Dublin (3.8% to 3.2%), while Galway remained steady at 2.8%. Despite a slight increase, Killarney, Co Kerry, posted a not-to-be-sniffed-at 3.9%.
At the other end of the spectrum however, Kilkenny’s vacancy rate increased marginally to 7.7% and Cork assumed the unenviable position at the top of CBRE’s vacancies chart at 19.5%.
With a number of significant openings about to hit St Patrick’s Street this may paint a somewhat unfair picture of the city.
“That figure is probably not a true reflection of what is happening on the ground in Cork,” said Mr Cooper.
“There are a number of lettings that have happened very recently and are probably in solicitors’ hands and will transact over the next month or two months so I think that figure is somewhat misleading.
“There is significant activity and take-up happening down there at present and certainly there is big demand from retailers to identify good quality space on both St Patrick’s Street and Oliver Plunkett St. We’re involved in lettings on both of those streets so I’d say those figures will change significantly over the next quarter.
For others, optimism is tempered by what they consider a more realistic view of the Irish retail market, however. CSO figures released last week show sales volume of growth of 9% in the year and 5.7% in value.
Excluding the motor industry though, sales climbed 4.7% in the year and just 1.2% in terms of value.
This, according to Retail Excellence Ireland deputy chief executive Seán Murphy, hardly represents a strong upturn in the sector but rather underlines the challenges that persist.
“[These figures] underline why retailers remain extremely cautious about hiring new staff and very concerned regarding talk of any mandated wage increases in the absence of a stronger recuperation in the domestic economy,” said Mr Murphy.
“There is a lot of crowing about top-line vacancy rates but that is not chiming with reality. Certain brands will pay a premium to get onto the high street but that’s not reflective of the overall situation. It’s a flat retail environment.”
Mr Murphy said town centres have to be embraced ahead of out-of-town developments, adding that with cost being a perennial issue; city centre parking remaining troublesome; and tight margins across the country, a brighter future is emerging but “nothing to get breathless about”.
Decisions like that taken by An Bord Pleanála in March to grant planning permission for a 74,500sq m shopping centre on the outskirts of Limerick city despite protestations from scores of business people and Limerick City and County Council are reflective of the sort of large scale developments Mr Murphy wants to see take a back seat. That issue was also highlighted by the Royal Institute of the Architects of Ireland last week.
As one of the hardest hit industries in the recession, the Government seems at last to be looking at ways it can support its revival. A mooted €80m fund would be welcome but needs to be accompanied by urban living quarters to ensure the right mix is delivered, according to the architects’ body.
Retail employs about 270,000 people and contributes €16bn to the economy. The evidence so far points towards a gradual, but modest upturn which, until such time as the economic recovery moves from being an abstract notion to being felt in people’s pockets, is unlikely to accelerate.
