A number of significant commercial property transactions have led to investment volumes in Northern Ireland reaching £120m in the early months of 2016 - with deals worth a further £140m currently on the market - new research by leading commercial property agents Lisney has revealed.
While noting that the encouraging start to 2016 paints a positive commercial property picture for the rest of the year, Lisney has predicted that the number of investment transactions will decline during the next few months due to uncertainty created by a possible ‘Brexit’ following the European Referendum.
Publishing the findings from its report on the first quarter of 2016, the commercial property agent also revealed that the shortage in supply of Grade A office space has continued to grow during the first quarter of this year.
Headline findings from the report reveal that:
• Investment volumes during the first quarter of 2016 reached £120m, with a further £140m currently on the market.
• The largest investment of the year so far has been the £54.15m purchase of Bloomfield Shopping Centre by Elandi with Tristan Capital.
• The take-up of office space reached c.160,000 sq ft in the first quarter of 2016, the majority of which was made up of refurbished existing space rather than new builds.
• Demand continues to be strong for prime city centre retail pitches, although vacancy rates are declining further.
• Limited supply of industrial space and a weakness in demand from manufacturers, caused by low oil and commodity prices, led to very few industrial transactions of note completing in the first quarter of 2016.
The most significant of the £140m transactions currently on the market include Damolly Retail Park (asking price £33.5m), Citi’s Gateway Offices (£29m), Lisnagelvin Shopping Centre (£17.2m) and Downe Retail Park (£17m).
Declan Flynn, Managing Director of Lisney Northern Ireland, which specialises in office, retail, leisure and industrial property acquisition, disposal and investment, commented:
“The Northern Ireland commercial property market has enjoyed a buoyant 2016 thus far, driven largely by sustained investment transaction volumes and private equity funds selling out their loan books
“Cerberus has been particularly active in this period, agreeing the 15-acre Sirocco Site opposite Belfast’s Waterfront Hall, the Castlebawn development site in Newtownards and the long-awaited Royal Exchange development site in Belfast city centre.
“Encouragingly, demand remains strong for assets which are currently on the market and priced correctly. The purchase of Bloomfield Shopping Centre at a Net Initial Yield of 7.66% provides an indication of the opportunities which the region currently offers, while illustrating a tightening of the yield gap with comparable UK product.
“While this encouraging start to 2016 paints a positive picture for the market for the rest of the year as a whole, we predict the number of investment transactions will decline in the next few months before recovering again towards the end of the year.
“The reason for this is the uncertainty which abounds, ahead of the European Referendum, about the potential impacts of Brexit. We expect that most investors will take stock and await the outcome of the EU vote, as well as local elections, before making any further investment decisions.”
Examining the performance of the local office, retail and industrial property markets in the first quarter of 2016, Mr Flynn added:
“The restricted supply of Grade A office space got continually worse throughout 2015 and this has been compounded further in recent months. In the absence of new developments coming to the market, the gap between demand and supply will undoubtedly grow.
“Our research tells us there are a number of active requirements which the current supply cannot fulfil, notably that of HMRC seeking 100,000 sq ft of Grade A space. This shortage will put further pressure on rents, which have been rising steadily since 2014.
“Demand continues to be strong for prime city centre retail pitches and we are aware of a number of occupiers with either active requirements or deals currently at the legal stage. Looking ahead, we expect prime locations to carry on performing strongly with secondary pitches benefitting as a result – and regional towns continuing their slow revival.
“The industrial market also continues to experience low levels of noteworthy transactions, due largely to the lack of availability of space over 50,000 sq ft, while demand is suffering from low oil and commodity prices.
Lisney’s latest report on the Northern Ireland commercial property market can be viewed in full here: https://issuu.com/lisneybelfast/docs/q1_2016_research_report