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Grafton Street rents to rise after record letting

{con_title} August 28 2003

Rents in Dublin’s Grafton Street are due to rise significantly in the coming months following the setting of a new rent level for the former Thorntons confectionery shop beside Brown Thomas. Several retail units, including the Laura Ashley store, are due to have their rents reviewed this autumn.

The country’s largest property pension fund, IPFPUT, has effectively triggered a new round of rent increases by buying in the lease of Thorntons building which it has owned for 30 years. It has since relet the premises to O2
Communications at a record Zone A rent of E6,201 per sq m (E576 per sq ft) - more than 25 per cent higher than current rental values on the street. The letting will immediately set a precedent for other tenants facing rent reviews. Up to now the benchmark rent on the street has stood at E4,920 per sq m (E457 per sq ft) following the letting of number 1 St Stephen’s Green to fashion retailer Reiss over a year ago.

With five separate investments on the street valued at over E50 million, IPFPUT stands to benefit considerably from the new headline rent. Apart from the immediate income gain from reletting Thorntons, the building is expected to show a capital appreciation of close to 20 per cent. By year end, the five shops are likely to show a capital return of over 12 per cent - far ahead of returns forecast for both equities and bonds.

IPFPUT initiated the higher rents in Grafton Street by buying in the lease of Thorntons for over E600,000. It subsequently relet the premises to O2 at a rent of E377,500 from this month - far ahead of the E260,300 being paid by Thorntons. The 25-year lease does not include any tenant inducements. The ground floor has a retail area of 86 sq m (925 sq ft) with ancillary accommodation on four other floors bringing the total floor area to 312 sq m (3,358 sq ft).

Niall Gaffney, investment manager of IPFPUT, said yesterday that the rent set for number 87 Grafton Street would provide “very useful evidence” that, in conjunction with the Reiss letting, pointed to an upward trend in high street
rental values. This would clearly help landlords to secure a Zone A rent closer to the true market value.

Up to now Grafton Street rents had not reflected the depth of occupier demand largely due to the absence of new letting opportunities that could provide transparent letting evidence.

Mr Gaffney said he expected to see further “considerable rental growth” over the next 12 months in both Grafton Street and Henry Street - a development that would drive property returns in the medium term.

Mr Gaffney was advised by Eoin Feeney of agent Palmer McCormack. John Harrington of agent Harrington and Co acted for O2.

The next crucial letting on Grafton Street will involve the former AIB bank building which was sold in June for around E18 million. Several international traders are believed to be pitching for the premises which will have a ground
floor area of 198 sq m (2,131 sq ft) and even more space on the first floor.

Before the building can reopen as a retail outlet, the new owners will first have to get approval from the city planners to change the frontage. Because it is one of the few listed buildings on the street - it dates back to 1756 - the planners will be in no hurry to allow the present redbrick frontage and two entrance doors to be replaced by a glass shopfront. The new owners are also expected to seek permission to enlarge the windows along Chatham Street.