A slowdown in the retail market was to be expected this year but the speed at which it has taken hold over the past 12 months has been the real shock. Much of the year has seen retailers and landlords in discussions about how to reduce outgoings, be they rent or service charges. Likewise landlords are challenging retailers to look more closely at other costs such as staff and supply chains. These discussions over cost reductions have in most cases taken precedence over expansion, and as a result, transactions for 2009 are, as you would expect, significantly down on the previous years.

The retail market, much like all other property markets, enjoyed exceptional growth, especially in new shopping floor space but also in sales figures during the boom years. This in turn led to a constant scramble among retailers for the best pitches and centres in towns throughout Ireland in an effort to secure a larger market share. Now, like all markets, retail has been hit hard by the global downturn, by the difficult banking environment at home and by the increase in unemployment.

The market has come from a backdrop of high demand fed from a strong supply of retail space, particularly between 2005 and 2008, with developments such as Dundrum, Athlone town centre and Whitewater in Newbridge all coming on stream. A large amount of planned new space has cleared planning hurdles but most of it has now been delayed, with only schemes at an advanced stage construction, such as Douglas in Cork and Sportsground in Clonmel, opening this year. Any other developments are on hold save for one or two exceptions.

In the previous market, particularly in new shopping developments, the focus was mainly on rental income; tenant mix took a back seat as tenants battled each other to secure the best positions. This situation has been dramatically reversed. For many shopping centres it is now about void management and delivering retailers that will create a point of difference, aid footfall and generate more spending. This approach enhances the shopping experience for the customer and acts as a pull factor. There is no doubt that, as the market continues to recalibrate in terms of rents and revised spending, the immediate focus is on ensuring voids are kept to a minimum. This in itself is a difficult task, and is likely to be much more difficult in the less established centres.

The changed market conditions are having other effects. The sector has seen a sizeable switch towards predominantly turnover-related transactions. In some cases this means base rents with top-up payments and in others merely a percentage of turnover with no guarantee on rent. This is a major structural shift in the thinking of retail developers and means the relationship between developer and tenant is one of partnership rather than a contractual obligation to pay rent and outgoings.

Legislative changes have also allowed shorter lease terms, which were already prevalent in Britain, to become more standard here in Ireland. This will create difficulties for some landlords as they approach their financial institutions with 10- and 15-year leases in hand, instead of 20- and 25-year leases. In some cases those leases will have very early break options which further highlight the need to focus on tenant covenant and the overall quality of retailer.

The retail market relies on consumer confidence and spending, and until such time as consumers feel more confident and start returning to the shops, it will be difficult to introduce fresh names into the Irish market. However, there are signs that the steep declines in sales experienced by most retailers have started to slow down. In the UK, some retailers are even starting to show positive like-for-like sales.

We are unlikely to see new developments for some time as the retail industry consolidates. Any new development will require substantial pre-lets and a demonstration from developers that they can deliver the project and have a track record in the retail sector. In essence this means the emphasis will now be on asset management of existing portfolios, together with achieving optimum tenant mix.

There are some positive signs out there: Next, Boots, H&M and Top Shop are all expected to open new flagship stores in Cork city centre later this year and other retailers such as Heatons are continuing to expand and seek opportunities in Ireland.

For those retailers that are in a position to expand, it is an excellent opportunity to secure competitive terms and to secure them in some of the key locations around the country that might previously have been out of reach.

It is important that we see some positive news from the retailers in the marketplace as it will be a sign we have turned the corner. We sometimes forget the significant role retail plays both directly and indirectly to employment and contributions to the overall economy.

Karl Stewart is head of retail and a director at DTZ Sherry FitzGerald