Government Liars

The Irish government's U-turn on legislative intervention has left small business owners reeling and worried about the future. With few new businesses prepared to take out new leases on shops, offices, warehouses & industrial units around the country, and with most firms already locked in to existing antiquated leases, the failure to act by the FG/Lab administration will likely do little to aid the flagging economy. Ireland remains mired in recession, whilst all property values (both commercial and residential) continue to fall.

John Corcoran - a lobbyist for the Grafton Street Tenants - believes that it is only a matter of time before the government are forced to reconsider this thorny issue once more. Today, in Dublin, he said that the property lobby had secured only a pyrrhic victory as capital values in the IPD/SCSI commercial property index are likely to have continued on their downward trend in Q4, with more of the same for Q1 2012 as there is zero confidence in the prospects for growth & jobs. Plus he also added that retailers are having to sell more items at discounted prices, just to try and pay the rent, as the latest CSO Retail Sales figures ("value" not "volume") show; 2011 is the 4th consecutive year that sales have fallen, so cash in the till is even lower than 2010 which was a bad year, and that was lower than 2009 which was an horrendous year because the economy shrank by a tenth.

Clearly John is worried, especially as the latest casualty of the downturn was only announced this week; Barratts Shoes, who also have shops in Dublin e.g. Grafton Street, ILAC Centre & Swords. They join a long line of businesses who have succumbed to the intractable problem of dwindling sales against a backdrop of rising rents. Only the UK & Ireland retain the 'rental ratchet' clause in their commercial lease contracts. Preserving them only ensures that more businesses go to the wall. Indeed, there is a financial incentive for the larger institutional property investors (as opposed to the more flexible professional individual/family landlords) to keep existing leases running (vacant or occupied), because they are no longer assignable (at least to a sane person), and to engage in a "new let" would only crystallise a revaluation of the building sharply downwards. In the interim, they, along with their surveyors can continue to play the "Emperor's new clothes" game, citing 'valuations' as opposed to 'values'.

In case anyone is wondering, Irish commercial property values (what someone is prepared to pay for a building) are a lot lower than valuations (what some expert says a building is worth - a number on a sheet of paper with the shelf-life similar to the lifespan of a copper butterfly). There is one indisputable feature of every property crash...it is always preferable to reach the bottom sooner rather than later....Ireland it seems is hell bent on later.

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News & Politics

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