John Corcoran: landlords on Grafton Street have shown 'savage greed'

It's widely known that international retailers in Ireland are hurting, but they at least have more resources to weather the revenue drop of 40% that some have experienced and still pay their rent. Indigenous retailers can be more vulnerable.

One of the few Irish shops left on Grafton Street in Dublin is Korky's, one of a footwear chain owned by John Corcoran, a Dublin retailer of 30 years' standing. The shutter is down on the prime retail unit at the top of Grafton Street which he has rented for 14 years.

He recalls that his rent in 1995 was €100,000, and spiralled upwards during the economic boom, quadrupling to €445,000 by 2005. No longer able to afford the rent, he has spent months trying to sell the lease with a reverse premium, so far with no success.

"Nobody," he said, "wants this over-rented shop." He has accused landlords in the area of "savage greed", saying "we have paid tens of millions of euros to institutional landlords".

Having a unit on Grafton Street was more about prestige than turnover as the rent soared and ate into profits.

"We do very well in the Dundrum centre at a fraction of the Grafton Street rent," Corcoran claimed.

Tumbling by 27% in just a year, Grafton Street had the worst compound rent performance in the past year of all the major European capitals' top shopping streets, according to international real estate consultants Cushman Wakefield.

Another Grafton Street trader spoke of "alarming declines in consumer spending and customer footfall". He said retail sales had fallen by between 15% and 40%.

"The street has already been debased and degraded by vacant shops and a proliferation of auctioneers' boards," the Grafton Street tenants' association said in a submission to justice minister Dermot Ahern's office. "This scenario will be repeated in all major and minor shopping centres and high streets around the country."

The association wants rents to be reduced and upward-only rent reviews to be abolished.

One shopping centre owner in the north-west of the country is threatening to lock out a dozen retail tenants from mid-June, if a non-negotiable rental increase of over 45% is not paid.

"I can't afford it and we won't entertain it," said a national retail chain owner who has a shop at the centre. "Sales are down 25 to 30%, so where would we get the money for an increase?"

Retail sales are down 30% nationwide on average, according to Retail Excellence Ireland.

"Something needs to happen in the next six to eight weeks to prevent an aggressive and irreversible series of closures," chief executive David Fitzsimons said. "It's coming to an end game." Things are becoming more critical, Fitzsimons said, because once Nama is up and running banks will begin calling in their debts at a rate they haven't to date, signalling a death knell for some struggling retailers.

"We will see aggressive closures on a massive scale," he predicted.

"For a couple of national retailers who haven't been able to meet rents to date, the game is up."

Adding urgency, quarterly rents fall due for many retailers in July, when they will be expected to stump up three months' rent. However, some landlords are offering a reprieve rent and accepting one month's payment at a time.

Retailers eagerly await the outcome of the court-directed arbitration between Apollo Gallery on Dublin's Dawson Street (near Grafton Street) and its landlords, who the gallery claims are seeking a rent increase of 150%.

Edmund Holohan, Master of the High Court, suggested in his written decision on the law that the courts could be sympathetic to tenants' plight in a recession.

"A court will not be easily persuaded to accept an interpretation which will give the lessor a windfall in a time of recession," Holohan wrote. A preliminary hearing related to arbitration is set for 15 June.

A retail property estate agent commented: "Rent has risen to a level where the market won't support more rises. Tenants can't exit their 20-25 year leases which often have no break clause and they can't sell on the lease. Meanwhile landlords, which are often institutional investors, don't want to damage the capital value of their property by allowing rents to go down, which makes their value more unstable."

How Europe's Rents Compare

Dublin – Grafton Street, Prime annual rent per square metre = €4,800, Year-on-year growth = – 27%

London – West End, Prime annual rent per square metre = €5,382, YOY growth = 6.9%

Amsterdam, Prime annual rent per sqm = €2,400, YOY growth = 4.3%

Brussels, Prime annual rent per sqm = €1,625, YOY growth = 0%

Copenhagen, Prime annual rent per sqm = €2,349, YOY growth = 6.1%

Frankfurt, Prime annual rent per sqm = 2,880, YOY growth = 0%

Madrid, Prime annual rent per sqm = €2,880, YOY growth = 0%

Milan, Prime annual rent per sqm = €6,800, YOY growth = 4.6%

Paris, Prime annual rent per sqm = €10,500, YOY growth = 0%

*Data by Cushman & Wakefield, March 2009 Q1 European retail snapshots