Reflecting on economic data from Q1, many economists will be revisiting their full year forecasts in an attempt to predict the outcome for 2017. But with a myriad of data, and often conflicting newspaper headlines about the strength of the Irish recovery, economists could be forgiven for doubting their confidence in the outlook.
So what does the data tell us about Ireland’s performance in the first quarter? The Department of Finance recently upgraded its GDP growth forecasts by 80 basis points to 4.3%. Investec’s recent upgrade was even more pronounced, lifting forecasts by 120 basis points to 4.6% for 2017. These figures demonstrate momentum behind the Irish economy, which remains on track to be the EU’s fastest growing economy for the fourth consecutive year. Whilst consumer sentiment has been volatile in Q1 – largely a reflection of wider political and economic uncertainty driven by a combination of Brexit and a surprise Trump election – the latest reading from KBC Bank of Ireland / ESRI demonstrates higher consumption in March as the benefits of recent deleveraging positively impacts household budgets. This is feeding through to the tills, with recent Visa data reporting a 2.5% increase in consumer spending during the first three months of the year. At Dundrum, where we completed our acquisition in partnership with Allianz in July, we are also seeing encouraging consumer trends. The positive economic backdrop is undoubtedly part of the story, but it doesn’t reveal the entire picture.
The retail sector is highly competitive and the growth of multichannel retail continues to shape our venues. Consumer behaviours are continuing to evolve, with the acquisition of experiences now just as important as the acquisition of products or services. Successful retail destinations must offer a combination of flagship stores, modern dining, state of the art leisure attractions, first-class customer service and enticing events programmes to win customer loyalty. Shopping destinations that fail to adapt are unlikely to succeed. At Hammerson, we have a strong history of investing in our leading retail destinations to ensure that they remain at the forefront of constantly evolving retail trends, offering customers reasons to visit more frequently, to stay with us for longer, and to discover a wider range of stores in the centre. It helps that Hammerson is an established name in European retail – marking our 75th birthday this year – we have a rich heritage in creating iconic destinations including Bullring in Birmingham, Terrasses du Port in Marseille, and the newly celebrated ‘Best Shopping Centre’, Victoria Gate in Leeds.
Clearly a major part of the experience is providing customers with the best tenant mix. Our singular focus on retail means that we have built strong relationships with the leading international brands, and we are therefore at the top of the wishlist for major retailers looking to grow their European presence. At Dundrum, for example, we have already introduced a number of Ireland ‘firsts’, including American burger brand, Five Guys, and the popular Australian stationery retailer, Smiggle, which is due to open next month. We are also investing in the customer experience through innovative pop-up and commercialisation concepts. The current collaboration with Pippa O’Connor is a great example of this initiative. The celebrity model and blogger opened her first pop-up store at Dundrum last month, featuring a range of styles from her eponymous POCO collection. Testing a brand which had hereto only been available to customers online, the pop-up has already proved a huge success, exceeding sales expectations and boosting footfall across the centre by 12% over the opening weekend alone. We anticipate a similar level of customer engagement when internationally renowned landscape gardener, Diarmuid Gavin, unveils his ‘Garden of Pure Imagination’ at Dundrum next month. Free to the general public and set to run until September, the garden will display over 70 species of plants and host a whole programme of events including wellness sessions, master-classes from Diarmuid himself and a range of children’s activities.
So with Ireland’s economic outperformance and growing consumer confidence set to continue in the medium term, the ingredients are in place for a great year in retail. As with any sector, there will be winners and losers, but I predict that successful retail destinations will be those that can adapt to shifting consumer trends and deliver customer experiences that simply cannot be matched online.