InBus_Win09_1-55:InBusiness 1-61 11/12/2009 17:24 Page 32
FEATURE | Retail Sector
“CONFIDENCE WILL BEGIN TO BE RESTORED WHEN THE
property values at a time when stabilisation was
RATE OF UNEMPLOYMENT LEVELS OFF OR FALLS.”
just starting to emerge. Our frustration is that
government does not seem to realise the knock-
– Marie Hunt
on implications of taking such decisions
independent of input from those in the industry.
on Irish roads today; more than double the This is a bad deal for tenants. Pension funds and
number applicable during the last investors generally, as well as the lending banks,
scrappage scheme. have seen commercial property values fall by as
much as 60 per cent since 2007. This proposal
HOUSEHOLD SHORTFALL will further erode value without any benefit to
Anything related to household goods was also existing tenants, which is supposedly the reason
particularly vulnerable this year, tied in with the it is being introduced in the first place.”
collapse of the property market. Sales of
household equipment declined by 11.4 per cent LACK OF CREDIT
in the 12 months to August. This figure The banking crisis has been yet another thorn
disguises some surprises: August saw a jump of in the side of the retail sector, with the wider
26 per cent in sales of furniture and lighting, as business community finding it difficult to obtain
customers had waited for the opening of Ikea's working capital credit lines for some time now.
Dublin store. It is further anecdotal evidence of This is compounded by the unavailability of credit
cautious spending patterns. insurance: there are three major credit insurers in
One of the biggest issues in retail in 2009
has been cross border shopping trips: towns
“YOU NEED CONFIDENCE
Europe, and currently, Irish retail is considered
uninsurable. Retailers face placing huge orders
such as Newry enjoy long queues of Irish-
IN YOUR JOB AND YOUR
without the safety net they once had.
registered cars and a brisk trade in the Euro
INCOME, AND PEOPLE
For Marie Hunt, Director of Research with
currency, to the annoyance of retailers south of CBRE, one key to boosting demand lies in
the border. Cross-border shopping will clock in JUST DON'T HAVE THAT stabilising the labour market. “Confidence will
at €810m this year, according to Inter-Trade
AT THE MOMENT.”
begin to be restored when the rate of
Ireland. A study by the Alcohol Beverage unemployment levels off or falls,” she says.
Federation of Ireland estimates that 250,000
– Alan Nolan
There are already some signs that this is
households are crossing the border to shop, taking place – October saw a decrease of
and indeed cheaper alcohol is a major draw. cost pressures, the amendment at first appears 3,000 in the seasonally adjusted live register
However, measures taken by Minister positive. However, the amendment will do figure, which (at the time of publication)
Lenihan in Budget 2010 to reduce the VAT rate absolutely nothing to help existing tenants in currently stands at 422,500.
to pre-Budget 2009 levels, or 21 per cent, is the the short-to medium-term and is potentially “In the last 18 months, the savings ratio has
first step to levelling the playing field. The very harmful to the Irish investment market, gone up considerably – there is money there,
reduction in excise duty on alcohol is has also according to Florence Stanley. but people don't feel secure spending it,” she
been welcomed by retailers in the South and “This has come as a huge surprise to the continues. “Even if the economy picks up,
many now feel they have a fighting chance to industry,” she says. “We understood that the there's going to be a lag before consumers feel
compete with their northern counterparts. The Government had decided not to implement this confident to spend again. Most retailers
sector received more good news when UK measure and while no one is disputing the fact acknowledge that the early part of 2010 is not
Chancellor of the Exchequer, Alastair Darling that tenants in many sectors of the property going to be better than 2009.”
outlined a hike in the British VAT rate to 17.5 market have come under huge pressure in
per cent in his pre-Budget report in early recent months and many are struggling to meet RECOVERY AHEAD
December. It may not have been Christmas rent payments, the reality is that this move will Despite cuts in VAT and excise rates, for many
come early for southern retailers, but in a year do nothing to improve the plight of retailers and within the industry, though, cost-cutting is the
dominated by declining trade, any move that is office occupiers who are currently experiencing clearest path to recovery. It is here that the retail
likely to increase consumer confidence and such difficulties. This is because the legislation sector's ambitions stray into politics: in the
spending can be the start of a reversal will not be retrospective and will only apply to current climate, it remains to be seen how
in fortunes. new leases. Therefore, occupiers in existing acceptable cuts in VAT, excise duty, local
Another source of major controversy has leases will not benefit from this change and will authority rates, the public sector and social
been the surprise decision by Minister for have to continue lobbying their landlords to welfare will be to the Government, the
Justice, Equality and Law Reform, Dermot effect temporary rent reductions that will assist Department of Finance and the body politic.
Ahern, TD, to ban upward only rent reviews, them to trade through the current downturn.” Whatever happens, this winter will reveal much
which will come into effect on February 28th, “The net effect of this legislation will be to about the future of the Irish retail industry – at
2010. At a time when occupiers of commercial reduce the attractiveness of Ireland to investors the moment, the number one objective is to
property around the country are facing huge and banks, which will in turn further undermine stay in business.
32 InBusiness Winter 09
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