Karen Millen has agreed to pay €1.4 million - the highest key money ever on Grafton Street - for the lease of the Principles store while a recent shop sale on the street shows a yield of just 1 per cent, writes Jack Fagan
A British fashion multiple has paid a record price for a shop lease on Dublin's Grafton Street despite the continuing criticism about the ageing profile of many of its fashion outlets, the tatty image of some of the multiples and the high representation of mobile phone shops.
Karen Millen, currently based in Dundrum Town Centre, has paid a premium of about €1.4 million for the lease of the Principles store at 73 Grafton Street. It is easily the highest key money paid on the street and comes at a time when a number of other traders have been finding it difficult to shift their premises. Karen Millen traded through a franchise operation at the Powerscourt Centre for six years up to last summer and presently operates a concession in Brown Thomas and Clerys.
The Grafton Street store occupied by Principles is one of less than a dozen premises on the street with large retail floors. It originally formed part of the Grafton Cinema which closed more than two decades ago.
The building has 444sq m (4,780sq ft) of retail space on five levels, including 185.8sq m (2,000sq ft) on the ground floor. It also has a further 260sq m (2,800sq ft) of storage.
Karen Millen will be paying a rent of €520,000 for the building, equating to a Zone A rate of €4,520 per sq m (€420 per sq ft). With several new tenants on the street already paying €8,611 per sq m (€800 per sq ft), Millen can expect to have its rent doubled when it is reviewed in June of next year.
Principles had not apparently planned to offload its Grafton Street store but, when offered the €1.4 million premium, obviously decided to take it and look for a smaller alternative premises on one of the adjoining streets where rents are significantly lower. Principles, which is advised by Karen Leon of CBRE, also has outlets in Henry Street, Blanchardstown, Liffey Valley and the Jervis Centre.
Karen Millen will not be the only trader facing a significant rent increase on Grafton Street. Two other large stores, Next and HMV, which trade out of three floors in both stores, are both to have their rents reviewed in the coming weeks.
Next is paying around €393,000 for its store while HMV is thought to be paying a combined rent of around €750,000 on two leases. The Zone A rates in both cases are around €4,305 per sq m (€400 per sq ft). Overall rents could double in both cases.
The fast-rising rents on Grafton Street have forced many local traders out, opening the way for multiple fashion groups to come in.
Fashion trader Vera Moda, which occupies a fairly standard size shop of 98.4sq m (1,060sq ft) on the ground floor and a basement of 111sq m (1,200sq ft), recently had its rent increased by 114 per cent to €477,000.
One retail expert said "you need to be shifting a lot of goods to cover that level of rent".
Yield of 1% on sale
Apart from the record key money just paid for a fashion shop on Grafton Street, Dublin's leading high street has also apparently set a new investment yield with the sale of the freehold of O'Connors Jeans shop. Ann Hargaden of Lisney would not comment on speculation that the retail investment at 23 Grafton Street had sold for over €20 million. If that figure proves to be correct, the yield will be a mere 1 per cent. But, with the rent of €241,250 likely to double when it is reviewed shortly, the return on the investment will go to 2 per cent. Yields on the street have been falling in recent years - they have generally ranged between 3-5 per cent for most of the last decade, largely because of sharp capital appreciation and intense competition among multiples for a good pitch on the street.
