A lethal combination

Yesterday we reported on the problems being faced by famous Dublin department store Arnotts, which faces coming under the control of its banks and could now be sold for 1 euro. The retailer has been struggling under a mountain of debts after it unwisely got involved with a massive property development which encompassed its site.

It’s a shame for the former Selfridges buying director David Riddiford, who has been running Arnotts for the last few years and seems like a really decent chap, and also must be a concern for all the staff and the many UK retailers which operate concessions in the store. The irony is that apparently it’s not trading badly, despite the still weak state of Irish retailing, but that the owning family’s attempts to piggyback on the Celtic Tiger property boom appear to have backfired spectacularly.

While supermarkets are pretty good at it - because they have to be in order to get planning permission - retail history shows us that property development and non-food retailers don’t mix. In my previous job I worked on a commercial property magazine writing primarily about the office market in the City of London, where Marks & Spencer in its wisdom decided to build an office block on the corner of Gracechurch Street and Fenchurch Street with a store on the lower floors.

The store went down a treat with the shoppers of the Square Mile, but the offices were empty for ages while other buildings around the City were letting. I’m sure there was nothing wrong with the building, but they were up against property developers who let buildings to banks and insurance companies for a living and were rather good at it. After a couple of years sitting empty and costing M&S a fortune, it eventually found a tenant, but only when most of the other competing buildings were let.

In other words, retailers are best off sticking to retailing.