By offering a yield of 5.25 per cent, vendor Marks Spencer has gone a good way to addressing the main problem stalling sales on Grafton Street - low investment returns

THE NEWLY opened Tommy Hilfiger store on Dublin's Grafton Street is likely to be of interest to a number of cash-rich private investors when it is offered for sale by private treaty in the coming weeks.

Colm Luddy of CB Richard Ellis will be suggesting around €30 million for the building which, at that price, would show a net initial yield of around 5.25 per cent - easily the highest return offered on the street in recent years.

There is a general acceptance that sales of commercial properties on Grafton Street and other high streets will not resume until values are reduced.

Marks Spencer, which developed the Tommy Hilfiger store on the site of the former Grafton Arcade, has gone a good part of the way by offering investors a yield of 5.25 per cent on what is now one of the best shops on the street.

The decision to sell on the building had been expected for some time because of MS's continuing roll out of new stores and the fact that it was able to incorporate most of the original Grafton Street arcade into its existing store.

In the last significant sale on Grafton Street 15 months ago, housebuilder David Daly settled for a return of 2.4 per cent when he paid €115 million for the River Island store and the adjoining Wallis outlet.

A year earlier, a Dublin property developer accepted an equivalent yield of 2 per cent when he purchased the O'Connor Jeans shop at 23 Grafton Street.

Average yields on Grafton Street, according to the London-based IPD, were at their lowest level of 2.6 per cent in September 2007, but had risen to 4.1 per cent by last September.

Tommy Hilfiger is paying a strong rent of €1,672,000 for its new Grafton Street store which has 557sq m (6,000sq ft) of retail space at ground, first and second floor levels.

There is also a further 325sq m (3,500sq ft) of ancillary space.

The Zone A rent works out at around €1,000 per sq m (€93 per sq ft), somewhat ahead of the €890 per sq m (€82.7 per sq ft) recently agreed for another building on Grafton Street.

The Hilfiger store was apparently first offered to the famous New York jewellers Tiffany but it turned it down because of the high rent. It is now happily trading in Brown Thomas on the opposite side of the street. Hilfiger was eventually chosen after outbidding another fashion retailer Massimo Dutti, a sister company of Zara.

Luddy said he would be quoting north of 5 per cent for the investment. "We have not seen good value on Grafton Street for several years and I have no doubt that this building will be of interest to cash-rich private investors who have been holding back up to now."