Risk Assessment for Retail Property Investments in Ireland and Europe - Essay Example

The rise of disposable income (predicted to exceed 100 billion by 2010) and population growth in Ireland are the reasons that led to the escalation of the retail property segment. The retail investments contributed 52% of the total property investments in 2006. Retail parks and retail outlet centres have shown the most prominent growth in the retail sector since the year 1990. Some counties in Ireland like Leitrim and Roscommon do not have any shopping centre facilities at all while others like Laois, Kilkenny, Carlow, Westmeath and Louth are oversupplied (Market News, 2006).

The oversupply is a cause of concern for the retailers as it leads to more competition. The depression in the housing market, rising unemployment and other adverse economic conditions have affected the spending capacity of the customers in a negative fashion (Retail sector becoming more competitive, 2008). Fig. 1 shows the pedestrian foot fall in the first three months of 2008 on the two main streets of Dublin i.e. Grafton Street (down 9% as compared to the previous five years) and Henry Street (down 12%)(Finfacts Team, 2008).

However the conditions in Ireland are better than in other European nations. There is a vast scope of foreign retail investments in the country as compared to other European countries. The spending power of people is superior and the economic conditions are favourable for the retail expansion than those in other countries of Europe. The growth of the property sector also depends on the global economic scenario. The availability of funds from the banks for new ventures in the retail sector will also hamper its growth.

There is a concern about the oversupply and resulting stagnation as happened in the housing market. The investors must make sure that the overdevelopment does not have a negative impact on the rental and capital values. As shown in the fig.2 the rents in a major street in Dublin are very high compared to other countries in Europe and are stable over a couple of years, with retail shopping centres making the major contribution (Finfacts Team, 2008a). Fig.2 (Finfacts Team, 2008)The current scenario in the retail market in other European nations is as follows:There is a vast scope of retail development and investment in the Baltic States of Estonia, Latvia and Lithuania.

The retail sector is not fully developed yet and offers a great possibility of economic expansion.Eastern European countries like Poland, Hungary and Czech Republic have saturated retail markets in major cities and the focus of development is shifting to smaller regions.There is a huge retail investment opportunities in form of shopping malls and retail stores in Central European countries like Slovakia, Romania, Bulgaria and Russia.Portugal and Denmark will mark more than normal retail trade expansion.

Demand in these countries is more than supply, making them potential development prospects.UK is likely to experience a slowdown in the retail market investments as shown in fig.3. Fig.3 (Finfacts Team,