Grafton Street landlord cuts high street property values by 26%

One of the main landlords on Dublin’s Grafton Street, the capital’s premier shopping street, has slashed the value of its high street properties by 26 per cent over the first nine months of the year, as Covid-19 decimated retail trading in the city centre.

Irish property fund Iput, whose tenants across seven buildings on Grafton Street include lingerie outlet Victoria’s Secret, clothing brand Massimo Dutti and high-end homeware retailer The White Company, told investors in a recent update that footfall across its high street portfolio, also including properties on Henry Street, was down 34 per cent on the year in September.

That was before the Government introduced Level 5 pandemic restrictions last week, shuttering non-essential retail across the State until early December.

"Since the onset of Covid-19 we've lost names like Debenhams, Warehouse, Oasis and, more recently, Pamela Scott, that would have been synonymous with Dublin's main shopping streets. Vacancy rates before the latest restrictions came in were running at 10 per cent on both Grafton Street and Henry Street," said Richard Guiney, chief executive of Dublin Town, a business lobby group.

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“There isn’t a long queue of new entrants waiting to replace those that are leaving. We would have been anticipating some changes to the Dublin high street before Covid, with people already purchasing more goods online. But Covid has accelerated it. There needs to be proper planning to manage the change, to bring in more leisure, entertainment and residential uses of space in the city centre.”

The valuation drop across Iput’s high street retail portfolio is sharper than figures contained in the latest MSCI/SCSI Irish property report, published earlier this week, which indicated that Grafton Street and Henry Street property values had declined by 18 per cent and 19 per cent, respectfully, between March and September. Overall, Irish retail values fell 13 per cent over the period, it said.

Irish commercial property values fell 1.4 per cent in the third quarter, following a 3 per cent drop in the second quarter, when most of the economy was under lockdown, according to the MSCI/SCSI data.

Level 5 restrictions

Goodbody Stockbrokers analyst Colm Lauder forecast in the wake of the report that the Level 5 restrictions will drive a 2.5 per cent decline in commercial real estate values in the final three months of the year.

High street retail buildings make up just 5 per cent of the €2.9 billion Iput portfolio, with retail parks accounting for a further 11 per cent. More than 70 per cent of the fund is invested in offices. The overall fund declined by 0.5 per cent in value during the third quarter.

Iput recorded a 95 per cent rent collection rate for the first nine months of the year, supporting almost €77 million of dividend payments to investors over the period.

“Iput is the largest owner of offices in Dublin and just 5 per cent of the fund is invested in high street retail. Some of the retail units have been owned since the 1970s and reflect the fund’s long-term investment strategy. This crisis will pass and we see the long-term resilience and value in prime city centre real estate,” a spokesman for Iput said.