According to property consultants, Savills, expenditure on home improvements has increased sharply over the last 15 months, and this is driving a dramatic bounce-back in furniture store sales. Year-on-year, furniture and lighting sales have risen in each of the last eight months, and turnover increased by 18.4% in the year to March.
This is being driven by an upsurge in housing repairs and improvements.
Dr John McCartney, Economist and Director of Research at Savills said; “CSO estimates indicate that capital expenditure on home improvements has been trending sharply upwards since the middle of last year. This is encouraging customers back into retail parks and has contributed to a dramatic recovery in furniture store sales.”
Furniture store sales fell by 47% between May 2007 and October 2012 as the sector was among the hardest hit by the economic downturn. However, over the last 12 months furniture and lighting stores have been the best performers in the retail market, with overall sales up by 18.4%. DIY stores – another segment that suffered during the crash – have also seen a strong recovery with sales up 5.3% in the year.
According to John McCartney, other factors that have contributed to the dramatic recovery in furniture sales include a 34% recovery in housing transactions and a general improvement in consumer confidence;
“A sustained improvement in sentiment appears to have given consumers the confidence to finally begin contemplating the purchase of bigger-ticket items. Indeed this explanation is consistent with a 31% increase in motor sales in the last 12 months.”
Commenting on the retail property market, Savills say that improved trading has led to a demand for space in Dublin’s stronger retail parks, including Carrickmines, Airside and Blanchardstown.
Otherwise, activity in Q1 2014 has been primarily focused on prime high streets and better performing shopping centres in Dublin. Tight supply in these areas has seen competitive bidding, in particular from furniture, electronics and clothing retailers.
Gareth Shiells of Savills Retail Division said; “While the first half of the year is traditionally slower in terms of new store openings, there is a lot of activity behind the scenes. Dublin’s prime shopping centres continue to perform well with vacancy rates remaining low.”
However, Gareth Shiells commented that the recovery was not evenly spread across the country;
“In the regions, conditions remain very challenging with occupational demand tending to focus on Cork and Galway City Centres. Outside of these centres vacancy rates can be higher and lettings are often agreed on a turnover basis. Planning restrictions, a shortage of new entrants to the market and an over-supply of space have led to many regional retail parks suffering high vacancy rates. It is likely to be some time before this begins to improve.”
Savills conclude that, while one more tough budget is expected next October and debt levels remain high, the economic outlook continues to improve. In particular, the labour market recovery looks set to continue and this will lead to an ongoing improvement in aggregate household incomes and consumer sentiment. In turn this should support a better trading environment for retailers over the remainder of this year and into 2015.