RESEARCH

THE HENRY STREET REPORT

TRENDS ANALYSIS OUTLOOK THE HENRY STREET REPORT RESEARCH

SUMMARY HENRY STREET

projected to rise by 2.5% in 2017 conscious Irish consumer, a behavioural With 1 GPO Buildings now let agreed, the spread over ground and upper ground 1. Growth in real incomes is Introduction according to the Economic and Social legacy of the recent recession. Whether only building available on a new lease is levels, a reduction of a third compared supporting an expansion in Situated in the north city centre, the 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 remains to be seen. The fall in the value thoroughfare known as Henry Street is of a 0.6% forecast for general inflation, 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 , 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 City 3. Competition between namely Henry Street and Mary Street, consumer confidence, which is almost five stores in the Jervis Shopping Centre. Centre. A further example of this demand institutional investors for prime with the demarcation between the two back at the ten-year high level achieved The retailer has dropped its Wallace, Miss was TK Maxx’s letting of 3,250 sq m at retail assets in Dublin has Letting occurring at Liffey Street. Recording an in early 2016, before the uncertainty Selfridge and Burton stores, replacing them the in 2014, where they pay benefited Henry Street annual footfall of 30 million, the street has 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. 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 Zone A rent of 3,444 psm. At the time, at 3.75% shops, department stores and two in the past three years to now exceed € 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 international brand, in what is one of the Penneys, Debenhams, M&S, Dunnes suggesting scope for further appreciation. 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 premises at 3 Henry Street – which 2017 and by 3.0% in 2018. 6,000 various stages of delivery extends to 345 sq m – for a Zone A rent of Economy Despite the strong headline fundamentals, 5,000 €4,585 psm, setting a new bar for prime challenges remain for the retail sector, Grade A rents on the street at the time.

The macro underpinnings that provide € /sq m challenges which are best illustrated 4,000 the basis for the case to invest in The high rent achieved can be attributed by comparing retail sales versus volumes. Irish retail remain compelling, with to the building’s prime positioning on 3,000 While retail volumes have recovered to employment, wages, immigration and Henry Street, which places it at the such an extent that they are approximately 2,000 consumer confidence all trending in the juncture between the Jervis Shopping 10% ahead of pre-crisis levels of 2008, right direction from an investor’s point Centre, Arnotts and the Ilac Centre. More 1,000 retail values remain approximately 10% of view. recently, Elvery’s Sports moved from below. Strong discounting and price 0 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)

130

120 RETAIL

110 RENTS ON HENRY STREET ARE €4,850 PSM 100 FOR PRIME ZONE A SPACE

90 Value Volume 80 2010 2011 2012 2013 2014 2015 2016 Q2 2017 Source: CSO

2 3 THE HENRY STREET REPORT RESEARCH HENRY STREET

PO uildings Former Clery’s ublin Central Ilac Shoing Centre Henry Street Jeris Henry Street Estimated Sale Price €8,500,000 eartment Store eeloer Hammerson eeloer Hammerson & Irish Life eeloer Fitwilliam Shoing Centre ate Q4 2014 ield NIY 4.55% EY 3.25% eeloer Natrium Status Planning granted Status Completed Capital Partners eeloer Arcadia Group Tenant iConnect Sold Q2 2015 Status Planning granted Retail sace 56,155 sq m Retail sace 735 sq m Status Under Construction Status Completed Oner Hammerson uyer Irish Life Retail sace 3,478 sq m ote Total planning permission ote Amalgamation and extension of Retail sace 3,783 sq m Retail sace 1,858 sq m Accommodation 492 sq m ote Planning permission allows granted for this mixed-use existing retail units to incorporate part ote Consists of the creation of ote Consisted of the amalgamation Rent €160,000 pa for two medium sied 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 Henry Street completion due for September 2018 Sale Price €9,500,000 Henry Street ield NIY 4.27% EY 3.50% OMIIC STR LOER ate Q4 2015 Sold Q4 2016 Tenant eir uyer Friends First Oner Hammerson Accommodation N/A Rent €215,000 pa KIS I STREET Henry Street Zone A €2,917 psm Sale Price €20,500,000 ield NIY 4.04% EY 3.88% Henry Street Sold Q2 2017 ate Q3 2015 uyer AEW Tenant Pull & Bear Oner SSGA Cineworld Accommodation 632 sq m Henry Street Rent €375,000 pa Zone A 3,014 psm Estimated Sale Price €34,000,000 € ield NIY 3.66% EY 3.93% PARELL STREET Sold Q4 2014 uyer Irish Life Henry Street ate Q3 2016 Tenant The Health Store Oner Irish Life Henry Street Accommodation 332 sq m Sale Price €3,500,000 MOORE STREET Rent €200,000 pa ield NIY 6.02% EY 7.83% Zone A €4,004 psm

Sold Q3 2014 O’COELL STREET O’COELL uyer IPUT Henry Street Ilac ate Q1 2017 Tenant Elverys Sports Henry Street Shopping Oner Irish Life Estimated Sale Price €5,600,000 Centre Accommodation 808 sq m ield NIY 3.39% EY 3.75% Rent €460,000 pa Sold Q2 2015 Zone A €4,413 psm uyer Irish Life

Henry Street Henry Street For Let Q3 2017 Estimated Sale Price €7,100,000 Oner IPUT ield NIY 4.05% EY 3.50% Accommodation 402 sq m Sold Q2 2015 uoting Rent €420,000 pa SPORTS LIFESTYLE Zone A €3,660 psm uyer Irish Life DUNNES STORES

ANN'S BAKERY ANN'S RIVER ISLAND

DEBENHAMS JD SPORTS JD VODAFONE ICONNECT LET AGREED CARROLLS

BAG CITY

PENNEYS DIFFNEY

MANGO DIESEL THREE DEALZ

STAR JERIS STREET JERIS TO LET BUCKS ZARA EVANS LUSH H&M TOURSIT EIR EIR INFO Henry Street Mary Street ate Q1 2014 VODAPHONE BUTLERS Sale Price €17,000,000 GINOS SWAROVSKI PANDORA Tenant Mango

ield NIY 4.76% EY 3.99% PETER MARKS MAR STREET CARPHONE WAREHOUSE HER STREET DIRECT SPORTS LET Oner Irish Life

HICKEYS

POST OFFICE POST KORKYS

BOOTS CHEMIST HEALTH STORE DIRECTION

FIELDS

CLARKS SPARY GAME STOP JD SPORTS HAIR

HICKEYS HOLLAND & BARRETT ELVERYS SPORTS

OFFICE

NEXT SKECHERS MARKS & SPENCERS & MARKS VISION EXPRESS PULL & BEAR THREE SUMMERS ANN TOPSHOP ALDO

H SAMUEL H AGREED McDONALDS Sold Q4 2014 21 FOREVER Accommodation 1,797 sq m uyer SSGA Rent €650,000 pa SUGAR DOLLS SUGAR Zone A €3,444 psm Mary Street Sale Price €17,000,000 Henry Street GPO Arcade ate Q1 2016 ield NIY 4.13% EY 4.04% Tenant Ann Summers Sold Q3 2017 Oner Irish Life uyer SSGA Jervis Shopping STREET LIFFE Arnotts Former Clery's Accommodation 345 sq m Department Department Rent €360,000 pa Centre Zone A €4,585 psm Key Store Store Lettings Mary Street Sales ate Q3 2015 Tenant Deal Significant developments Oner Irish Life Cross City Line Accommodation 431 sq m Rent €275,000 pa Luas Zone A €3,401 psm AE STREET

4 5 THE HENRY STREET REPORT RESEARCH

Investment More recent transactions of note include SSGA’s purchase of the McDonald’s “AEW’s acquisition Institutional investment competition for tenanted 14-16 Mary Street in Q3 2017 for 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 that there is still declining from 6.5% in 2011 to 3.75% now. fund AEW completed the purchase of Mirroring their activity in Grafton Street, 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 The property is let to the Arcadia Group Ltd, Dublin’s prime retail up a substantial portfolio of assets through 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 its City Retail Fund, a fund targeting prime when viewed in a of ‘Irish Life Assurance Company’ – which 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 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 prospectsRENTS 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 Q3 2001 2010 2011 2015 2012 2006 2000 2008 2004 2013 2002 2014 2003 2007 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 who have acquired a significant interest in expected to be spent on reconfiguring the retail units. PRIME YIELDS store. Meanwhile, following a deal with the the area following their acquisition of Project On the eastern side of O’Connell Street, Westin Family, Noel Smyth has started CURRENTLY STAND AT Jewel from NAMA in 2015, which included a the redevelopment of the former Clery’s construction to separate 7-9 Henry Street 50% stake in the Ilac Centre as well as the Department Store will provide for 3,478 from the Arnotts store in order to create an Dublin Central site. At the Ilac Centre they, sq m of retail and will re-establish the street independent retail unit which will consist along with joint venture partner Irish Life, as a retail destination once again, having of 3,783 sq m of retail space. have recently completed the reconfiguration 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 3.75 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 7 RESEARCH John Ring, Head of Research [email protected]

Robert O’Connor, Research Analyst [email protected]

CAPITAL MARKETS/RETAIL Adrian Trueick, Director [email protected]

Peter Flanagan, Director [email protected]

Ross Fogarty, Director [email protected]

Shaun Collins, Surveyor [email protected]

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