RetailInvestments: A retail investment at Mary Street, Dublin 1, has been sold for well over the odds because of the unusual scarcity of well-let commercial properties coming on the market.
Though agent Hamilton Osborne King had been quoting a guide price of over €13 million for the shop rented by McDonald's fast food chain, the indications yesterday were that the investment had made the guts of €20 million when it was sold by tender.
Despite the likelihood that the rent will double over the next few months, the yield is unlikely to be much over 3 per cent.
Even in a market where commercial investments are less available than at any time over the last 20 years, the price paid for the Mary Street investment will reopen the debate on the real value of retail investments outside both Grafton Street and Henry Street.
A figure of almost €20 per sq ? (€xx per sq xx) for McDonald's could well set a new benchmark for a location outside the two principal high streets.
It is also likely to discourage institutions which had been hoping to re-enter the market.
Number 14/16 Mary Street was developed over six years ago on the site of Keatings pub and though McDonald's is no longer the most sought after tenant because of the multiplicity of its outlets and the increasing criticism of fast food, the building has two strong selling points - it adjoins the Jervis Centre and 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.
Even if McDonalds were to close this outlet, there would be any number of fashion tenants looking for it because of the sizeable floor areas.
McDonald's is paying a rent of €349,000 for the building under a 35-year lease which has about 29 years to run.
Both tenant and owner can avail of tax allowances because like the adjoining Jervis Centre, the site is located in an urban renewal designated area.
Mr John Keating, who sold the McDonald's building, is currently developing a bar and restaurant in a former church nearby which has been in retail use for a number of years.
A rent review is overdue since last October on the McDonald's building and the new owners - rumoured to be a family trust - will obviously be hoping to get a substantial increase.
McDonald's is paying a Zone A rent of €170 per sq m (€15.79 per sq ft), well below the €370 per sq m (€34 per sq ft) agreed at least two years ago by JD Sports when it opened a new store opposite Jervis Street.
Several landlords on Henry Street, anxious to implement rent increases, are waiting for someone to step forward and establish a new Zone A level for the street.
Most of the rent reviews are outstanding for the best part of a year, long before Zara moved into the redeveloped Roches Stores and changed the fortunes of the street.
Some experts contend that Henry Street is now trading infinitely better than Grafton Street since the arrival of Zara.
"Shoppers are spending money in Henry Street whereas Grafton Street is a place to be seen and to meet your friends," says one retail agent.
