Job security ‘drives’ Irish consumer demand

Job security rather than workers’ salaries or disposable income has a far greater impact on consumer demand and retail rents, a report has found.

Research from the ESRI and Savills Ireland shows the degree of certainty workers feel they have in their job plays a much bigger role in driving consumer spending that has been previously thought.

This phenomenon subsequently drives retail rents as demand increases.

According to Savills Ireland research director John McCartney and ESRI senior researcher, David Duffy the research shows employment is by far the most important factor in this regard, with a 1% rise in jobs growth bringing about a 0.9% increase in rental growth 15 months later.

Surprisingly, wage increases and higher levels of disposable income are much less ìnfluential.

In addition to clarifying which factors are important and how much each factor impacts on shop rents, the research provides a forecasting framework for the national rents’ index.

“The forecast model suggests the gradual recovery in overall retail rents which has been in place since last year will continue over the coming 12 months,” Dr McCartney said.

However, the authors emphasised their model forecasts the national baseline and, within this, certain locations and retail formats will continue to show stronger rental growth.

The results of the research was released yesterday ahead of the Irish Economic Association annual conference tomorrow.

Speaking ahead of the conference, Dr McCartney said Nama is likely to continue feeding a pipeline of major portfolios which will come to the market in the second half of the year.

“Continued deleveraging by Nama and other financial institutions will see some major retail portfolios brought to the market over the coming months. Investors’ appetite for these assets will depend on their expectations of future rental growth.

“While the leading indicators suggest an improving outlook, the real challenge is to understand how quickly and how much this general improvement will impact on retail rents.”

Meanwhile, real estate experts Kennedy Wilson yesterday predicted that Dublin office rents will break previous peak levels over the next two years.

Article Source: