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Economy boosts Irish building

By Susan Thorne

A booming economy is fueling strong growth in retailing and shopping center development in the Republic of Ireland, as the country awakens from decades of economic slumber.

Ireland is outpacing all other European Community states, with a hefty GDP growth of 7.5% in 1997 and an expected 7.3% rise in 1998, according to data from the Paris-based Organization for Economic Cooperation and Development (OECD). This comes on the heels of a national economic revival, boosted by European Union (EU) funding, that has transformed Ireland from poor cousin to a land of opportunity.

Observers now talk of the Irish Miracle and the "Celtic Tiger" -- variations on terms that until recently were applied to the once fast-growing Southeast Asian economies.

"We're wary of that comparison now," said Vincent O'Doherty, chairman of Superquinn, a Dublin, Ireland-based supermarket retailer that also owns several neighborhood shopping centers. Nevertheless, Mr. O'Doherty listed some key factors that are sustaining Ireland's retail rebirth.

In a reversal of more than a century of emigration, Ireland now attracts immigrants from other parts of the world, and the high level of education of the young work force has made it an attractive location for multinational businesses, including IBM, Microsoft and Motorola. Three-quarters of all software sold in Europe is now produced in Ireland, Mr. O'Doherty said.

Incomes have grown rapidly, and accompanying lifestyle changes have brought a strong demand for consumer goods. Some predict that the standard of living in the home of the shamrock will overtake that of the United Kingdom within a few years.

Consumer spending is so sustained that even the universal post-Christmas slump failed to materialize in Dublin this year, said Maurice Greene, spokesman for Green Property plc, Dublin-based property investors and developers. He saw striking evidence of this in February at Blanchardstown Centre, his company's large suburban Dublin center. "You'd think it was Christmas all over again," he said.

Rents have also been showing the effects of high demand. Mr. Greene said that retail strip warehousing next to Blanchardstown has been renting for a record £14 (Irish) per square foot (approximately $20), compared with norms of around £8 (Irish) per square foot.

The thriving consumer market has spurred a jump in new retail capacity, much of it in shopping centers. Since the first Irish mallopened its doors in 1966, 8.7 million new square feet of retail space have been added in shopping centers, according to information from the University of Dublin's Centre for Retail Studies.

Given Ireland's population of 3.6 million, this works out to more than 2 square feet per inhabitant. (The last national census, in 1988, estimated total retail space in the Republic at 25.6 million square feet.)

Center construction is continuing to expand steadily. One-third of the country's total shopping center square footage was constructed in the 1990s. The first major regional mall, the 650,000-square-foot Talla Center, was developed by Monarch (now Dunloe House) in 1990 on the Dublin periphery.

Dublin has seen the debut of four shopping centers of 250,000 square feet or more in the last eight years: Blanchardstown, The Square, St. Stephen's Green and Jervis Street.

New formats are coming in, too: Green Property plans a factory outlet mall next to the Killarney railroad station.

Dublin, the nation's capital, was the first trade area to have shopping malls. The format remains a prime retail focus, with the most recent wave of development concentrated around the city's peripheral ring road. Three of the country's most important projects --Blanchardstown Centre (being expanded to 650,000 square feet from 377,686 square feet), the Pavilions in Swords (400,000 square feet, to open in 2000) and Liffey Valley (250,000 square feet plus possible additions) -- are coming on stream there.

Secondary cities such as Cork, Limerick, Galway and Waterford saw new retail development in the 1970s and 1980s. In the 1990s, development of shopping centers has spread out to smaller urban areas such as Wexford, Donegal, Longform, Castlebar and Gorey, many of which acquired their first sizeable (over 20,000 square feet) shopping centers in this decade.

The soaring rate of Irish car ownership and use has been a great encouragement to shopping mall development, said Mr. O'Doherty, adding that the national total of car registrations doubled between 1990 and the end of 1997.

"It's part of what I refer to as the Americanization of the Irish customer," he said.

But there is government resistance to the suburban, automobile-driven shopping center on the North American model. New center construction is tightly controlled by planning authorities, who have tried to contain much of it to downtown city cores, restricting out-of-town shopping center growth. A site-specific tax incentive plan has also encouraged retailers to locate in designated areas, usually downtown. Jervis Shopping Centre, a 324,206-square-foot center that opened in 1996 in central Dublin, was one such designated scheme.

These planning efforts have had a significant impact on development. Outside Dublin, more than half of all shopping center footage is located in town and city centers, according to the Centre for Retail Studies, and several derelict town centers have been revitalized as a result.

Yet this careful control may prove difficult to maintain. One factor challenging the status quo is the arrival of British retailers, who have discovered an affluent consumer market in their backyard. Virgin Records, Marks & Spencer, Next (apparel), drug/pharmacy retailer Boots, Dixons (electrical goods), the Burton Group and Sears plc (of London) are some of the British companies that have extended operations into Ireland under their own banners.

London-based supermarket giant Tesco leaped across the Irish Sea one year ago by acquiring the Irish grocery chain Quinnsworth, thus taking over around one-quarter of the country's supermarkets. British grocers J. Sainsbury and Safeway are expected to follow soon.

Tony Parker, director of the Centre for Retail Studies, attributes the influx partly to the peace process in Northern Ireland, which spurred a retail rush there which is spilling over into the Republic. Some observers say that Ireland's economic revival is spurring efforts by Ulster's Protestant business community to forge political ties, in defiance of the ideological positions taken by some of their political leaders.

The arrival of the British is stimulating growth of more and larger shopping centers, Mr. Parker said, because these companies want to open multiple units in Ireland and are often looking for sizable premises as well -- up to 2,000 square feet to 4,000 square feet as opposed to the 600-square-foot to 800-square-foot sites at most Irish shopping centers.

A growing number of large-format retailers with big box and category killer stores are also creating demand for bigger, out-of-town store sites, noted Lisa McGrane, a Dublin-based retail negotiator with Jones Lang Wootton retail property consultants. Warehouse retailing, which has not previously been very traditional or popular, is becoming a part of new and existing centers, she said. A warehouse park (similar to what would be called a power center in the United States) is being added to Blanchardstown Centre, and another will be part of the new Liffey Valley center. English supermarket companies, accustomed to stand-alone locations in the United Kingdom, are also seeking five- to 10-acre sites in Ireland, she said.

Ireland's home-grown large-store retailers -- including Goff's, Pet Stop, Mainly Irish and Hickey Fabric -- are part of the same trend toward bigness, Mr. Green observed.

British retailers are accelerating the push to out-of-town shopping center sites, and are less influenced by the double tax write-offs that entice many indigenous retailers to locate in designated areas, Ms McGrane said.

"In my opinion, they don't need it [incentives]," she said. "The demand is there for good out-of-town locations in large schemes with good road network and good frontage."

Liffey Valley and Blanchardstown are both filling up with prospective tenants without benefit of designation, she pointed out. She predicted that property prices will be pushed up by the increasing competition for retail space.

Mr. O'Doherty of Superquinn also predicted that it will not be possible to suppress town-edge and out-of-town growth much longer.

"We're already at breakpoint in some cases," Mr. O'Doherty said, citing the case of his company's supermarket in the town of Naas. With people shopping more by car, "we create gridlock there every Saturday," he added.

Superquinn is buying edge-of-town sites where it hopes to locate centers, and Mr. Quinn said his company is telling planning authorities that "the game is up. We have to have your support, and we need a different attitude to planning."

More out-of-town retail is inevitable given the high rate of growth in demand and purchasing power, he said.

How much more is left in the Irish tiger's tank? The Retail Institute's Mr. Parker sees no immediate end to the present growth.

"I don't see overdevelopment for the foreseeable future, not as long as the economy holds up," he said. Demand for retail space remains strong.

"More schemes [shopping center developments] of quite substantial size are in the pipeline, and they are effectively being pre-let [pre-leased] quite rapidly. They're being snapped up, especially by British retailers," Mr. Parker added.

Demographics are also working in Ireland's favor. Mr. O'Doherty pointed out that heavy emigration from Ireland in the 1950s and 1960s created a smaller complement of senior citizens than in other European countries. At the same time, the birth rate was high through the 1980s, so there is a good labor force and strong complement of young professional consumers.

"We have an underload [shortage] of the old, and a strong, well-educated young population," he said.

But, he added, Ireland is still a small country in relative terms, with 1million people living in its biggest city, and 200,000 in the next-largest urban center.