It seems we may have finally weathered the storm. I’m not referring to the almost tropical weather we have enjoyed of late, but to the possibility of a silver lining to the dark cloud that has cast a severely bleak shadow on Belfast’s Grade A office market over the last number of years.In this case, the dark cloud takes the form of the shortage of Grade A office stock and lack of development.
Last month, a long awaited report commissioned by Invest NI finally confirmed that indeed the current supply of available Grade A office space in Belfast was ‘extremely limited’ at approximately 250,000 sq. ft., i.e. less than one year’s take up.
This revelation in itself was a surprise to very few.
Like a dark rain cloud, we could all see it coming. Warnings were issued but eventually, as no one seemed to face up to the issue or least of all provide a solution, our market at best has been uncertain.
Needless to say, frustration has mounted. Particularly as the general economy has shown signs of improvement. I have witnessed first-hand the increase in Foreign Direct Investment (FDI) activity with many companies seeking large, modern floor space which is in short supply and also local occupiers initiating searches for new offices. However, without a solution to the shortage we will almost certainly lose out on these golden opportunities to rebalance our economy.
This is where the Invest NI report, and the potential silver lining, comes in to play.
The report recognised that access to funding remains the primary barrier to property development with the prevailing ‘historic’ low rental returns also having an effect on the viability of new developments.
In order to overcome this, a number of ways in which government intervention could assist with the rejuvenation of the Grade A office market locally were explored with the most feasible seeming to be that of providing ‘mezzanine funding’.
This mechanism would see applications made to Invest NI for loans from the Financial Transactions Capital (FTC) towards development costs.
I understand that this would most likely only be for up to a third of the costs and repaid with interest. Despite the fact developers will still require capital it certainly removes the barrier to development.
With demand forecast at 1.1m sq.ft. in Belfast over the next three years and development timescales taken into consideration, now really is the time to act in order to secure a positive future for not only the office market, but the wider economy which will benefit from FDI and the jobs it brings.
Given that Stormont’s Enterprise Committee has been briefed and the ‘mezzanine funding’ proposal is with the Department of Finance for consideration, we can rest assured the problem is finally being considered which is a huge step in the right direction.