Grafton Street’s reputation for having the fourth highest rents in Europe may be about to take a battering.

A new study by Dublin estate agents Lisney shows that rents on Dublin’s main high street fell during 2008 by over 22 per cent, with most of the slippage coming in the final three months.

The agency describes the fall as “a correction from the unsustainably high rent levels” as the economic recession took hold.

A broader study of the retail market found that rents generally fell by 7.69 per cent in Q4 and by 11.51 per cent over the entire year. Consumer spending was at a 24 year low up to the end of October, falling by 7.3 per cent on a year-on-year basis.

Lisney says that with traders’ profit margins having been squeezed, the demand for shops on the street “has fallen considerably”.

There are at least eight leases for sale on the street and for the first time in many years, a reverse premium – in this case €100,000 – is being offered by the owners of Korky’s shoe shop for anyone prepared to take over its lease.

Lisney says that with a considerable increase in retail space generally, traders could now avail of shorter leases, break options, extended rent-free periods and contributions towards capital outlay. Turnover-related lettings were also expected to become more popular.

The Lisney rental indices shows that commercial rents as a whole fell by 10.85 per cent in 2008 – the second time that has happened since records began in 1974. The previous fall was after the 1992 currency crisis. Most of the fall-off in rent levels occurred in the final three months of last year.

The index calculated that office rents dropped by almost 12 per cent last year with the largest falls in the city centre and south Dublin suburbs. The industrial market did best, falling by only 1.61 per cent.