The decision by M&S to hold on to the Grafton Arcade is a setback for a street which has lost a lot of its prestige, says Jack Fagan
Marks & Spencer is to have a more prominent trading position on Dublin's Grafton Street following its decision to incorporate the former Grafton Arcade into its existing high street store.
The move will come as a surprise, because agents for the UK multiple were already in discussions with several top-name traders interested in renting what would have been a major new store alongside M & S.
M & S had been expected to get a rent of at least €2.5 million for the new store which was to have a retail area of up to 1,858sq m (20,000sq ft) at basement, ground and first floor levels. The availability of the outlet had already drawn interest from a range of leading multiples (Zara, H&M, New Look and Boots) which have been looking for a suitable trading pitch on the street with large floor plates.
The decision by M & S to hold on to the additional space will be seen as a setback for a street which has lost much of its prestige in recent years through the opening of a range of tacky shops. "The enlargement of M & S means that we will get more of the same," says one retail agent. "That won't do much for Grafton Street, as M & S has stores all over the place."
Whatever the implications, M & S will have an extended trading area of around 6,503sq m (70,000sq ft) on five levels when the Grafton Arcade is redeveloped as part of the main store. The arcade extends from Grafton Street to Duke Lane at the rear. M & S purchased the Grafton Arcade from Guardian Royal Exchange in the early 1990s for about £20 million (€25.4 million) and, over the past five years, its agent, Aidan O'Hogan of Hamilton Osborne King, bought in about 15 different leases. The last three, held by Golden Discs up to last March, cost around €7 million.
Rents to rise by over 100%
Grafton Street looks set to hold on to its reputation as one of the most expensive high streets in the world. Rents seem set to increase by more than 100 per cent in a new round of reviews under way.
The latest settlement involves one of the largest stores on the street, HMV, which is based in two adjoining, equally-sized buildings, numbers 65 and 66. The rent for number 66 has just increased by 108 per cent to €715,700. A rent review on the adjoining unit, owned by a different institution, is expected to get under way shortly. In the same area a rent review is also overdue on the large Next fashion store (the present rent is €393,000) while on the opposite side of the street, the tenants in the Jigsaw unit have had their rent increased by 135 per cent to €752,000 a year. Also facing a substantial increase is the Laura Ashley store which has been paying €730,000 up to now. Several new tenants on the street are already paying a Zone A rate of €8,611 per sq m (€800 per sq ft). The new HMV settlement works out at €9,149 per sq m (€850 per sq ft), the highest level on the street apart from the €12,916 per sq m (€1,200 per sq ft) being paid at the River Island store near Brown Thomas.
Several agents representing landlords contend that the Zone A rate for stores over 1,858sq m (2,000sq ft) will shortly break the €10,764 per sq m (€1,000 per sq ft) mark. If that were to happen it would force many small individual traders out of business. Agents representing the owners of buildings on Grafton Street frequently cite the record key money of €1.4 million paid earlier this year by Karen Millen for the lease of the Principals unit. Agents contend that this was an important vote of confidence in a street that has been taking a drubbing in the media. Karen Millen's current rent of €520,000 per annum is expected to more than double when reviewed next June.
Aidan O'Hogan, retail specialist with HOK, says he believes a gap could open up on Grafton Street between the rents paid by MSUs (medium-sized units) and the standard shops which would reflect the efficiency of operating an MSU. These units had 10 per cent more staff but far higher turnover.
