Retail The opening of Zara, and proposed expansion of Arnotts could boost retail rents on Henry Street by up to 25 per cent. Gretchen Friemann reports.

Over the last number of years, Grafton street has reigned supreme as Dublin's prime retail centre, but the opening earlier this month of the popular Spanish clothing chain Zara, along with the proposed two-acre expansion of Arnotts, could overturn that traditional south-side dominance.

Property experts predict the ever-increasing footfall on the north side of the Liffey could boost retail rents on Henry Street by at least 20 to 25 per cent next year, significantly narrowing the city's current north/south divide.

Latest Zone A rents for Grafton street stand at around €6,201 per sq m (€575 per sq ft) compared to €4,305 per sq m (€400 per sq ft) on Henry street.

But Arnotts chairman, Mr Richard Nesbitt, is confident that both streets will be level pegging by the end of next year. He claims that investing €130 million in the department store's massive enlargement will help transform Henry street into the city's prime retail district and dismisses Grafton Street's current rental lead as an aberration.

He said: "Henry Street is and always has been where real people who want to spend money shop, so I see no reason why rental values shouldn't increase to at least to the same level as Grafton Street's over the coming months. In fact it has always mystified me that the two areas weren't on the same level given that Henry Street has the greater retail range."

However, property experts argue the shortage of supply on Grafton Street and the fact that it is a thoroughfare linking two popular tourist destinations, Trinity College and St Stephen's Green, are enough to maintain it as the most expensive street in the country.

A recent survey by global real estate firm, Cushman & Wakefield Healey & Baker, ranked Grafton street as the tenth priciest retail location in the world, outstripping the main shopping areas of cities such as Milan, Singapore and Tokyo.

And Dr Clare McParland, head of research at Jones Lang LaSalle in Dublin, sees little indication of Grafton Street's "main street" status changing in favour of Henry Street. Despite acknowledging that there is considerable room for rental growth on the north side of the Liffey, she claimed "retailers will always want to maintain a presence on Grafton Street".

Latest footfall figures by property agent CB Richard Ellis Gunne appear to back up this assertion, with Grafton Street attracting an extra 4,000 people during peak shopping periods. In the third quarter, Grafton Street's footfall reached 21,000 between 3 p.m. and 4 p.m. on Saturdays compared to 17,000 on Henry Street.

Although recorded before the unveiling of Zara, the agency's divisional retail head, Mr Cormac Kennedy, maintains that Grafton Street's limited capacity and "exclusive" retail range will continue to give it the edge over Henry Street in terms of rental value.

In the company's annual report, due out next month, he says: "Continuing demand for prime Grafton Street and Henry Street pitches is expected to drive Zone A rents to record levels with the €7,000 per sq m (€650 per sq ft) barrier expected to be reached on Grafton Street over the next 12 months and €5,500 per sq m (€510 per sq ft) likely to be achieved on Henry Street by year end."

But Mr Nesbitt argues the presumption that limited supply equals greater rental value is erroneous. He said: "The fact that Henry Street has a far greater retail range than Grafton Street is more significant than supply issues. Oxford Street also has plenty of space and its rental values are still on average higher than those on Bond Street.

"Furthermore, the introduction of the Luas next year is expected to drop an extra 30,000 people into this district every day."

According to Mr Nesbitt, Henry Street rental values trail their southside counterpart because they haven't been tested to the same extent.

He said: "In the last 12 months, zone A rents on Grafton street have shot up because of a number of high profile disposals. The Henry Street rental value has not been tested in the same way and when it is, we're going to see "substantial increases".

Grafton Street retailers meanwhile fear next year could bring the double whammy of further rental hikes as well as falling demand following Roches Stores' €40 million makeover.

One proprietor who agreed to talk on condition of anonymity said: "There's no doubt that in the last number of weeks the strength of Henry Street has impacted on shopper numbers here. But it's too early to tell whether this is just a novelty factor or part of a longer-term trend."

The store owner is due for a rental review next year and fears another 50 per cent hike. He said: "It will be a hard call for us if rental values jump by another 50 per cent as they did last time. We will have to assess whether our sales can sustain that increase."

Pia Bang, eponymous proprietor of the ladies' fashion outlet on Grafton Street, also voiced concern at rental increases. Although not due for a rent review for another three years she said: "You reach the limit of what you can pay each time the landlord increases the rent. And you have to think hard to rejuggle the figures and work out how you can absorb the increase."

But despite the punitive rental overheads, Ms Bang claims she will fight to stay on the street. "Everybody has to fight for their corner here. But I think it's worth it because once you're off Grafton Street, it's extremely difficult to return."