OFFICE MARKET STRONG H1 FOR 2016 DESPITE BREXIT UNCERTAINTY
Belfast, 01 July - The first half of 2016 has seen good results for office lettings and retail in Northern Ireland, whilst uncertainty over Brexit did cause some areas of the commercial property market to stall.
CBRE’s latest bi-monthly research report for July highlights positives in the market, and indicates some of the potential implications of last week’s Brexit vote.
The Belfast office market in H1 2016 showed positive signs with up to 75,000 sq ft of leasing activity recorded in Q2 bringing total take-up for 2016 to 235,000 sq ft. This is excellent when compared with the 87,487 sq ft of leasing activity in the same period for 2015.
Prime rents are steady at £17.50 per sq ft and we expect to see them climb to £18 per sq ft in the next six months. There are currently approximately 750,000 sq ft of active requirements for office accommodation. It is unclear whether all of these will all remain active in the face of the Brexit decision and some occupiers will require reassurance about the corporation tax reduction in 2018.
Retail also showed solid levels of activity, with some of it occurring outside the core Belfast market. Securing premises is becoming challenging for retailers, with vacancy low in the better schemes. The weak sterling could also now see a surge of shoppers from the Republic, benefitting border towns in particular but also Belfast.
Recent transactions have included Ecco Shoes at Victoria Square, The Entertainer at CastleCourt, Home Bargains at Holywood Exchange and go Outdoors and Smyth’s Toys at Valley Retail Park. A new larger Lidl store at Connswater Retail Park was also granted planning permission.
The investment sector is likely to be most affected by Brexit uncertainty over the coming months, with some investors holding off activity until there is a clearer political and economic landscape. However, it could also hold advantages for some investors.
Mr Lavery continued:
“Currency movements as a result of Brexit could see a unique buying opportunity emerge. The uncertainty created could keep interest rates lower for longer which bodes well for investment in real estate. Local investors have remained active particularly outside Belfast in locations such as Banbridge, Strabane and Coleraine.
“In total we recorded 10 investment transactions totalling £70 million signed in Q2, bringing the year total to £103 million in 15 transactions. Whilst some decisions have been put on hold in the short term, we feel that other properties due to be brought to the market will proceed regardless in H2 2016, with currently £75 million worth of sales to be launched.”
Assets currently for sale or sale agreed include Downe Retail Park in Downpatrick, agreed at approximately £17 million; Lisnagelvin Shopping Centre in Derry/Londonderry, agreed at approximately £16 million; and Tower Shopping Centre Ballymena, which is guiding £6 million.
Planning applications and permissions have continued apace with activity mainly in the student accommodation and hotel sectors. Belfast City Council recently approved a 250 bed hotel on Corporation Street and construction is continuing on several new hotel projects including a 179 bed Hampton by Hilton Hotel at Bruce Street, the 216 bed Grand Central Hotel at Bedford Street and 120 bed Titanic Hotel at Titanic Quarter.
Mr Lavery concluded:
“The hotel sector in NI stands to benefit in the short term from the weakness in sterling. However, until there is clarification on the ramifications of the Brexit vote, developers of new schemes of all types are anticipated to proceed with caution and an eye on how our politicians work together to regain market confidence in a changed landscape.”
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 165 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.