HENRY STREET THE RESEARCH - Knight Frank
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RESEARCH
THE
HENRY
STREET
REPORT
TRENDS ANALYSIS OUTLOOK
THE HENRY STREET REPORT RESEARCH
SUMMARY HENRY STREET
1. Growth in real incomes is Introduction projected to rise by 2.5% in 2017
according to the Economic and Social
conscious Irish consumer, a behavioural
legacy of the recent recession. Whether
With 1 GPO Buildings now let agreed, the
only building available on a new lease is
spread over ground and upper ground
levels, a reduction of a third compared
supporting an expansion in
Situated in the north city centre, the retail Research Institute (ESRI). In the context this changes as real incomes grow 45 Henry Street, which is being marketed to its previous combined footprint. The
consumer spending
thoroughfare known as Henry Street is of a 0.6% forecast for general inflation, remains to be seen. The fall in the value at a rent of €3,660 psm. Regarding the new larger unit is the flagship store for its
comprised of a single pedestrianised the growth in earnings will boost real of Sterling against the Euro since the shadow letting market, 52 Henry is let Topshop brand in Ireland, with the Zone
2. Prime Zone A Henry Street street bounded by O’Connell Street to incomes and thus consumer spending Brexit referendum is providing a further agreed while a new tenant is being sought A rent standing at €4,155 psm. The
rents are now in the order of the east and Jervis Street to the west. power. Also, net migration returned to incentive for cross-border shopping. for 17 Henry Street. letting illustrates a preference for large
€4,850 psm However, it should be noted for reference positive territory last year for the first time This, together with the continued rise of floorplates by high-end international
purposes that Henry Street is technically since 2009, providing another layer of online retailing, will limit the scope for The Arcadia Group last year triggered retailers, unit configurations which are
comprised of two separate streets, demand. This all supports increases in greater high street retail pricing power. co-terminus 20-year break options at its presently in short supply in Dublin City
3. Competition between five stores in the Jervis Shopping Centre. Centre. A further example of this demand
namely Henry Street and Mary Street, consumer confidence, which is almost
institutional investors for prime
retail assets in Dublin has
with the demarcation between the two
occurring at Liffey Street. Recording an
back at the ten-year high level achieved
in early 2016, before the uncertainty
Letting The retailer has dropped its Wallace, Miss
Selfridge and Burton stores, replacing them
was TK Maxx’s letting of 3,250 sq m at
the Ilac Centre in 2014, where they pay
benefited Henry Street surrounding the Brexit referendum forced An early marker of Henry Street’s rental with one large unit extending to 1,858 sq m an annual rent of €550,000 per annum.
annual footfall of 30 million, the street has
arguably the best retail offering in Dublin a retreat. These trends have seen total recovery was Mango’s letting in Q1 2014
4. Prime yields currently stand due to the combination of high street private consumption rise by over 10% of 1,797 sq m at 46-47 Henry Street at a
at 3.75% shops, department stores and two in the past three years to now exceed Zone A rent of €3,444 psm. At the time, FIGURE 2
shopping centres all in close proximity. pre-crisis levels, although on a per capita the deal represented an important Prime Henry Street Zone A Rents
Prominent occupiers include Arnotts, basis they remain slightly below, endorsement of the street from a leading
5. Henry Street and its environs suggesting scope for further appreciation. international brand, in what is one of the
Penneys, Debenhams, M&S, Dunnes 8,000
are undergoing a substantial Stores, TK Maxx, Zara, H&M, Mango and In this regard, the ESRI are forecasting largest units on the street. In Q1 2016,
facelift, with a number of River Island. private consumption to grow by 3.1% in Ann Summers let the former Pamela Scott 7,000
redevelopment projects at 2017 and by 3.0% in 2018. premises at 3 Henry Street – which 6,000
various stages of delivery
Economy Despite the strong headline fundamentals,
extends to 345 sq m – for a Zone A rent of
€4,585 psm, setting a new bar for prime 5,000
€/sq m
challenges remain for the retail sector,
The macro underpinnings that provide Grade A rents on the street at the time. 4,000
challenges which are best illustrated
the basis for the case to invest in The high rent achieved can be attributed
by comparing retail sales versus volumes. 3,000
Irish retail remain compelling, with to the building’s prime positioning on
While retail volumes have recovered to
employment, wages, immigration and Henry Street, which places it at the 2,000
such an extent that they are approximately
consumer confidence all trending in the juncture between the Jervis Shopping
10% ahead of pre-crisis levels of 2008, 1,000
right direction from an investor’s point Centre, Arnotts and the Ilac Centre. More
retail values remain approximately 10%
of view. recently, Elvery’s Sports moved from 0
below. Strong discounting and price
Arnotts to let 808 sq m in Q1 2017 under 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3
With the recovery of the labour market deflation are two factors behind the 2017
a ten-year lease at 18 Henry Street for
bringing employment back to 2006 difference, and encapsulate the
a Zone A rent of €4,413 psm. Source: Knight Frank Research
levels, wage inflation has begun to take competitive pressures faced by retailers
hold – average hourly earnings are who are pitching their products to a value
FIGURE 1
Retail Sales Index (Excluding fuel, motor and bar sales)
RET
130
REN AIL
120
TS
110
ON
FOR HENRY S
100
PRIM TREE
E ZO T AR
NE A E €4
SPAC ,850
90
Value E PSM
Volume
80
2010 2011 2012 2013 2014 2015 2016 Q2
2017
Source: CSO
2 3THE HENRY STREET REPORT RESEARCH
HENRY STREET
1 5 GPO Buildings 1 Former Clery’s 2 Dublin Central 3 Ilac Shopping
2 Centre 4 7- 9 Henry Street
3 53 Jervis 1 36 Henry Street
Estimated Sale Price: €8,500,000 Department Store Developer: Hammerson Developer: Hammerson & Irish Life Developer: Fitzwilliam Shopping Centre Date: Q4 2014
Yield: NIY 4.55% EY 3.25% Developer: Natrium Status: Planning granted Status: Completed Capital Partners Developer: Arcadia Group Tenant: iConnect
Sold: Q2 2015 Status: Planning granted Retail space: 56,155 sq m Retail space: 735 sq m Status: Under Construction Status: Completed Owner: Hammerson
Buyer: Irish Life Retail space: 3,478 sq m Note: Total planning permission Note: Amalgamation and extension of Retail space: 3,783 sq m Retail space: 1,858 sq m Accommodation: 492 sq m
Note: Planning permission allows granted for this mixed-use existing retail units to incorporate part Note: Consists of the creation of Note: Consisted of the amalgamation Rent: €160,000 pa
for two medium sized units at development extends to of covered walkway as internal space a single retail unit via the separation of three retail units into one single unit Zone A: €1,841 psm
basement, ground and first floors 158,000 sq m of 7-9 Henry Street from Arnotts with
2 35 Henry Street completion due for September 2018
Sale Price: €9,500,000 2 37 Henry Street
Yield: NIY 4.27% EY 3.50%
Date: Q4 2015
DOM
Sold: Q4 2016
Tenant: eir
Buyer: Friends First
Owner: Hammerson
Accommodation: N/A
INIC
Rent: €215,000 pa
3 42-43 Henry Street Zone A: €2,917 psm
KING
STR
Sale Price: €20,500,000
Yield: NIY 4.04% EY 3.88% 3 22-23 Henry Street
LOW
S INN
Sold: Q2 2017 Date: Q3 2015
Buyer: AEW Tenant: Pull & Bear
ER
Owner: SSGA
STRE
Cineworld Accommodation: 632 sq m
ET
STRE
4 18-21 Henry Street Rent: €375,000 pa
LL
RNE
Zone A: €3,014 psm
ET
Estimated Sale Price: €34,000,000
Yield: NIY 3.66% EY 3.93% PA
Sold: Q4 2014
Buyer: Irish Life
4 21 Henry Street
Date: Q3 2016
Tenant: The Health Store
Owner: Irish Life
5 17 Henry Street Accommodation: 332 sq m
Sale Price: €3,500,000 Rent: €200,000 pa
MOO
Yield: NIY 6.02% EY 7.83% Zone A: €4,004 psm
Sold: Q3 2014
Buyer: IPUT
RE S
O’CONNELL STREET
5 18 Henry Street
Date: Q1 2017
Ilac
TREE
Tenant: Elverys Sports
6 51 Henry Street Shopping 2 Owner: Irish Life
Estimated Sale Price: €5,600,000 Centre 3 Accommodation: 808 sq m
T
Yield: NIY 3.39% EY 3.75% Rent: €460,000 pa
Sold: Q2 2015 Zone A: €4,413 psm
Buyer: Irish Life
6 45 Henry Street
7 52 Henry Street For Let: Q3 2017
Estimated Sale Price: €7,100,000 Owner: IPUT
Yield: NIY 4.05% EY 3.50% Accommodation: 402 sq m
Sold: Q2 2015 Quoting Rent: €420,000 pa
Buyer: Irish Life
8 Zone A: €3,660 psm
LIFESTYLE SPORTS
2 1
DUNNES ST
9 7 6 7 6
RIVER ISLAND
ANN'S BAKERY
2
DEBENHAMS
JD SPORTS
VODAF D
ICONNECT
LET AG
CARROLLS
BAG CITY
PENNEYS
DIFFNEY
TOURSIT 7 46-47 Henry Street
THREE
DIESEL
MANGO
DEALZ
STAR
TO LET
JERVIS STREET
BUCKS
LUSH
ZARA
EVANS
H&M
8 43-44 Mary Street
ORES
3 INFO
EIR
ONE
REE
EIR
BUTLERS Date: Q1 2014
Sale Price: €17,000,000 VODAPHONE
GINOS Tenant: Mango
Yield: NIY 4.76% EY 3.99% PETER MARKS MARY STREET CARPHONE WAREHOUSE HENRY STREET DIRECT SPORTS SWAROVSKI PANDORA
LET Owner: Irish Life
Sold: Q4 2014 AGREED
HICKEYS
Accommodation: 1,797 sq m
POST OFFICE
BOOTS
HEALTH MIST
KORKYS
DIRECTION
FIELDS
CLARKS
SPARY
HAIR
JD SPOR
GAME STOP
HOLLAND
ELVERYS
HICKEYS
VISION
OFFICE
PULL &
NEXT
SKECHERS
MARKS & SPENCERS
ANN SUMMERS
THREE
TOPSHOP
ALDO
H SAMUEL
McDONALDS
FOREVER 21
Buyer: SSGA 9 Rent: €650,000 pa
1
CHE
1 Zone A: €3,444 psm
EXPRES
STORE
BEAR
TS
SPORTS
SUGAR DOLLS
& BARRET
5 4
4 3
S
9 14-16 Mary Street 5 4
8 8 3 Henry Street
T
Sale Price: €17,000,000 GPO Arcade
Yield: NIY 4.13% EY 4.04%
5 Date: Q1 2016
Tenant: Ann Summers
Sold: Q3 2017
Buyer: SSGA Jervis Owner: Irish Life
Shopping Arnotts Former Clery's Accommodation: 345 sq m
LIFFEY STREET
Department Rent: €360,000 pa
Centre Department Zone A: €4,585 psm
Store Store
Key
Lettings 9 39 Mary Street
Sales Date: Q3 2015
Tenant: Dealz
Significant developments Owner: Irish Life
Luas Cross City Line Accommodation: 431 sq m
Rent: €275,000 pa
Luas Red Line Zone A: €3,401 psm
ABBEY STREET
4 5THE HENRY STREET REPORT RESEARCH
Investment More recent transactions of note include
SSGA’s purchase of the McDonald’s
Institutional investment competition for tenanted 14-16 Mary Street in Q3 2017 for
“AEW’s acquisition prime retail assets in Dublin has benefited €17.0 million at a net initial yield of 4.13%.
is a timely indicator Henry Street and resulted in yields In a welcome development, international
declining from 6.5% in 2011 to 3.75% now.
that there is still Mirroring their activity in Grafton Street,
fund AEW completed the purchase of
42-43 Henry Street for €20.5 million in Q2
value to be had in Irish Life have been a key long-term 2017 representing a net initial yield of 4.04%.
stakeholder on Henry Street, having built
Dublin’s prime retail up a substantial portfolio of assets through
The property is let to the Arcadia Group Ltd,
trading as Evans, and has an unexpired
investment market the years. Chief amongst these is their lease term of over three years and will sit in
50% stake in the Ilac Centre – an acronym
when viewed in a of ‘Irish Life Assurance Company’ – which
its City Retail Fund, a fund targeting prime
high street retail in Europe. It is unlikely that
European context.” was the first city centre shopping centre in Evans will seek to renew the lease upon
Dublin and the largest in Ireland when it expiry given they unsuccessfully marketed
opened in 1981. In addition to this core the lease for assignment/sub-lease in 2014.
holding, they own many own door retail
With pan-European portfolio managers
units on Henry Street with their most recent
seeing prime retail as the best way to gain
large acquisition being the purchase of
exposure to an expected pick-up in
18-21 Henry Street as part of the Capital
European consumer spending while
Collection for an estimated €34 million.
mitigating the negative impact of online
RENTS
spending, we perhaps would have expected
FIGURE 3
greater interest from international funds in
Prime Henry Street yields
Dublin high street retail given Ireland’s
8
out-perform growth prospects relative to its
7
European peers. While yield compression
6
has been significant, it is interesting to note
5
that of 27 major European cities tracked by
%
4
Knight Frank, there are still ten cities that are
3
at least as expensive as Dublin based on
2
current yields. AEW’s acquisition is a timely
1
indicator that there is still value to be had in
0
Dublin’s prime retail investment market
2001
2010
2011
2015
2006
2012
2000
2004
2008
2013
2002
2014
2003
2007
Q3
2017
2009
2005
2016
when viewed in a European context.
Source: Knight Frank Development management. As detailed earlier, much of two new streets under the plan would link
this value creation is being achieved by Upper O’Connell Street and Henry Street,
Henry Street and its environs are currently amalgamating smaller stores into larger boosting consumer draw and enhancing the
undergoing a substantial facelift, with ones in order to meet the demands of large accessibility of the location. In addition, the
a number of redevelopment projects at international retailers. In a similar vein, portion of Dublin Central with frontage onto
various stages of delivery. When finished, Arnotts has just announced that they will Henry Street should significantly strengthen
these projects have the cumulative inject a further €4.0 million in capital the retail offering of the GPO end of the
potential to significantly augment Henry expenditure into the store following the street which has struggled to attract
Street’s retail appeal. €2.5 million commitment announced last high-end retailers, owing to the presence of
Leading much of this change is Hammerson, year, with a major component of this a number of small and poorly configured
PRIME YIELDS who have acquired a significant interest in
the area following their acquisition of Project
expected to be spent on reconfiguring the
store. Meanwhile, following a deal with the
retail units.
CURRENTLY STAND AT On the eastern side of O’Connell Street,
3.75%
Jewel from NAMA in 2015, which included a Westin Family, Noel Smyth has started
the redevelopment of the former Clery’s
50% stake in the Ilac Centre as well as the construction to separate 7-9 Henry Street
Department Store will provide for 3,478
Dublin Central site. At the Ilac Centre they, from the Arnotts store in order to create an
sq m of retail and will re-establish the street
along with joint venture partner Irish Life, independent retail unit which will consist
as a retail destination once again, having
have recently completed the reconfiguration of 3,783 sq m of retail space.
become increasingly dominated by food
of ten smaller units into five larger ones, with Long-term, however, the real catalyst for and beverage retailers in recent times. The
the rental uplift achieved, returning twice the change will be Hammerson’s ‘Dublin Clery’s and Dublin Central redevelopments
€1.5 million capital expenditure invested. Central’ project. Assembled over a decade along with the addition of two Luas stops on
With the Ilac Centre achieving rents of about by Chartered Land, the five acre city centre the new Cross City Line will bring increased
a third of Dundrum – despite having the site has planning permission for 158,000 footfall to O’Connell Street and Henry
same annual footfall of approximately 18 sq m of mixed-uses. With the majority of Street. The linking with the Luas Green Line
million – there is a clear opportunity to the development fronting onto Upper will help the location make inroads into the
enhance returns through active asset O’Connell Street, the proposed addition of south-side retail catchment area.
6 7RESEARCH
John Ring, Head of Research
john.ring@ie.knightfrank.com
Robert O’Connor, Research Analyst
robert.oconnor@ie.knightfrank.com
CAPITAL MARKETS/RETAIL
Adrian Trueick, Director
adrian.trueick@ie.knightfrank.com
Peter Flanagan, Director
peter.flanagan@ie.knightfrank.com
Ross Fogarty, Director
ross.fogarty@ie.knightfrank.com
Shaun Collins, Surveyor
shaun.collins@ie.knightfrank.com
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