Retail Investments: A shop on the corner of Mary Street/Jervis Street will test the retail investment market, writes Jack Fagan, Property Editor
A shop at Mary Street in Dublin 1 rented by McDonald's fast food chain will be the first significant retail investment to go on the market this year.
Brian Cooney of Hamilton Osborne King is quoting a guide price of over €13 million for the building and says that with the rent due to at least double shortly, the yield should be over 4.5 per cent. The investment is to be sold by tender.
Number 14/16 Mary Street was developed six years ago on the site of Keatings pub and unlike many of the other buildings on the street has a large open-plan floor plate of the kind now preferred by retailers.
The ground floor extends to almost 278.7 sq m (3,000 sq ft) and there is a total floor area of around 1,021 sq m (11,000 sq ft) on four levels. The shop adjoins the Jervis Centre which is trading exceptionally well.
McDonald's is paying a rent of €349,000 for the building which is held under a 35-year lease and has almost 30 years to run.
Both tenant and owner can avail of tax allowances because the site is located in an urban renewal-designated area.
A rent review is overdue since last October and looking at the upward swing in rents on the street, the new owner can bank on a substantial increase. McDonald's is paying a Zone A rent of €170 per sq m (€15.79 per sq ft), well short of the €370 per sq m (€34 per sq ft) agreed by JD Sports when it opened a new store opposite Jervis Street.
Landlords owning shops on the street are expecting a significant increase in rents over the coming year because they are already well behind those in Grafton Street. The recent opening of Zara has brought considerably more shoppers into the street and the arrival of the Luas service in Middle Abbey Street will give the area a further boost.
One of the strong selling points of the investment is that even if McDonald's was to close this outlet, there would be no shortage of high quality fashion tenants looking for it because of the floor sizes.
Brian Cooney says the McDonald's investment provides purchasers with a "long-time secure income in one of Dublin's city's prime retailing pitches".
The sale is unlikely to be followed by many more investment disposals in the coming weeks because of the expectation that institutions will be happy to bide their time.
The general expectation is that investment turnover this year will fall short of the €850 million that changed hands in 2003. Green Property and two funds, Royal and Sun Alliance and Royal Liver, accounted for more than half the value of the sales.
