Debenhams close to signing up for O'Callaghan's Mahon Point

By Neil Callanan

Dublin, Ireland, 21 July, 2002

The British retailer Debenhams is close to signing a deal to open a department store in the massive Mahon Point development in Cork, The Sunday Business Posthas learned. The mixed use scheme on 111 acres is being built by O'Callaghan Properties and was granted planning permission by An Bord Pleanala last week.

No deal has yet been signed, but staff in the Debenhams store in the Jervis Centre have been told that the company is expanding into Cork. O'Callaghan Properties is headed by developer Owen O'Callaghan.

Construction on Mahon Point will begin in October, with the eventual development cost likely to exceed €445 million. It is the biggest construction project ever undertaken in Cork.

O'Callaghan Properties has already agreed a stg£100 million forward funding deal for the scheme from the German investment fund Deka.

"It's a five to six-year project with a lot of elements, but we will start with the business park and the shopping centre," said O'Callaghan. He said retail rents at the scheme will be pitched at a level similar to those at the Douglas Court and Wilton shopping centres, which are the largest suburban shopping centres on the southside of Cork city.

Office rents at Mahon Point are likely to be around €162 per square metre. CB Hamilton Osborne King is handling lettings. As well as the shopping centre and business park, Mahon Point will also include DIY stores, a supermarket, 40 small shops, restaurants and an 11-screen cineplex.

Two large retailers, believed to be Tesco and Superquinn, are competing to occupy the supermarket space.

No deal has yet been agreed on the cineplex.

A national trade centre, four-star 150-bedroom hotel, 4,645 square metres of office space and a leisure centre will also be built on the site. A park and ride facility linking Mahon Point with the city centre is also being incorporated into the project.

The opening of the Jack Lynch tunnel and several major road developments in the locality have made Mahon suitable for such a large-scale scheme. Locals in one of the most disadvantaged parts of the country had been in favour of the development, with not a single objection lodged by anyone living in the area.

The two objections received by An Bórd Pleánala came from RGDATA, which represents independent retail grocers, and from Douglas Developments, a company controlled by businessman Clayton Love Junior which owns two shopping centres nearby.

RGDATA has predictably criticised the decision to sanction the development, despite the fact that the shopping centre element is comparable in size to the existing development at Douglas Court.

RGDATA director general Ailish Forde predicts that the new development at Mahon Point would damage businesses in the centre of Cork and would have a negative impact on outlying areas. However, retail rents in Cork have been growing dramatically in recent years and record rents are now being achieved in the city centre.

Zone A retail rents on Patrick Street last year were around €2,187 per square metre, but the Spanish retailer Mango is believed to be paying €2,799 for the former Bank of Ireland building near Merchants Quay. This suggests that rents have increased by over 27 per cent in the past 12 months and highlights the demand from multinational retailers for units in the city.

The relative lack of prime shopping space in Cork has frustrated many retailers looking to expand into the city. A few years ago Virgin was forced to purchase the Queens Old Castle shopping centre and convert it into a megastore in order to get a significant foothold in the city.

The Mahon Point scheme is expected to create a minimum of 3,500 full-time and 2,500 part-time jobs when completed, a significant boost to an area with high local unemployment rates. The developers are also to spend €3.8 million on community benefits within the Mahon and Blackrock areas.

O'Callaghan has spent over four years attempting to get planning permission for the centre. Permission had already been granted for 431 residential units as well as commercial zones.

The decision by An Bórd Pleanála means that Cork City Council will finally receive the €52 million it is due from the sale of the site. This is to be spent improving the city, particularly upgrading Patrick Street.