28
January
2014
|
00:00
Europe/Amsterdam

Stronger 2014 In Prospect For The Northern Ireland Commercial Property Market

Technological Change and Globalisation Will Shape The Next Real Estate Cycle

CONTACT: Brian Lavery – 0044 208 9043 8555 or brian.lavery@cbre.com or : Marie Hunt– marie.hunt@cbre.com.

Belfast, 28th January 2014 – Commercial property consultants CBRE today released their Outlook 2014 annual report containing their final year figures for transactional activity in different sectors of the Northern Ireland commercial property market in 2013 and their predictions for each sector of the Northern Ireland market in the year ahead.

Speaking at the launch of the 25th edition of their annual Outlook report at the Merchant Hotel in Belfast, this morning, Brian Lavery, Managing Director at CBRE Northern Ireland said, “Last year marked a major turning point for the commercial property market in Northern Ireland with the first tentative signs of recovery emerging in the second half of the year. The most notable trend was an increase in activity in the investment sector as the process of deleveraging kicked off in Northern Ireland in the last six months of 2013. There was strong demand from both institutional and local buyers for the assets that came available for sale. Activity in the occupier sectors across the region was more muted however. 2014 is shaping up to be a busier year for the commercial property market in Northern Ireland, fuelled to a large extent by improving economic indicators and by some improvement in the availability of debt funding. We are likely to see property being released for sale by NAMA and various financial institutions at a similar pace to the second half of last year. We expect to see continued demand from UK institutions for prime assets that come available for sale in Northern Ireland, which in turn will lead to some further yield compression over the course of the next 12 months. We expect to see further new development and refurbishment starting in the Belfast office market in 2014, as a result of the scarcity of Grade A office accommodation in the city although shortages will remain until such time as these new office schemes come on stream. We expect to see rental growth emerging in the office sector during 2014 for the first time in many years, with prime rents expected to increase by as much as 20% this year. However, it is likely to be some time before rental growth re-emerges in the retail and industrial sectors of the market”.

CBRE Ireland’s Key Predictions for 2014

-CBRE expect improving economic conditions to bolster demand for new office accommodation in the Northern Ireland market in 2014 with demand expected to emanate from the expansion of existing occupiers as well as from new entrants.

-Although there are a number of new office developments planned, which will ultimately ease the shortage of Grade A office accommodation in Belfast, it will be some time before these schemes come on stream. CBRE therefore expect to see rental growth emerging in the office sector in Northern Ireland over the course of the next 12 months. The property consultants expect prime office rents in Belfast to increase by 20% to reach £161.46 per square metre (£15 per sq. ft.) by yearend. This anticipated rental growth will in turn boost demand for office investment properties in core locations.


-In addition to new development, CBRE expect to see increased focus on office refurbishment projects in the Belfast market although this will obviously be dependent on the availability of funding.

-While discount retailers were the most active occupiers in the Northern Ireland market over the last number of years, CBRE expect to see more high-profile retail brands coming to the fore during 2014. In addition to existing retailers expanding and relocating, CBRE expect to see several new retailers entering the Northern Ireland market in 2014, including the Apple premium reseller iConnect, which is expected to open two new stores in Northern Ireland this year.

-While prime high streets and major shopping centres accounted for the greatest proportion of activity in the retail property market in Northern Ireland last year, CBRE expect to see this momentum filtering down to secondary streets and provincial locations to some degree during 2014.

-No rental growth re-emerging in the retail sector in Northern Ireland this year.

-An increase in the number of restaurant and coffee shops opening new stores this year.

-Vacancy rates in the industrial market in Northern Ireland will continue to decline over the course of the next 12 months, primarily as a result of no new development occurring in this sector for several years.

-Industrial take-up in Northern Ireland in 2014 will mainly comprise short-term lettings at relatively low rents as has been the case over the last number of years. No rental growth anticipated in this sector of the market in 2014. We expect continued demand from owner occupiers for freehold property as prices remain below replacement cost.

-There was a notable increase in transaction volumes in the investment sector in Northern Ireland in 2013 with 17 investment transactions completing in the 12 month period. CBRE expect this momentum to continue in 2014 considering the volume of deleveraging that still has to occur in the Northern Ireland market. There is reasonably good visibility on investments that are likely to come to the market for sale in 2014, including some shopping centres, which suggests an even higher volume of investment activity occurring in Northern Ireland this year.

-Demand for prime investments in the key population centres is expected to continue to emanate from UK institutional buyers, many of whom have purchased in the last 12 months and who may want further exposure to the region. Outside of prime locations, demand is likely to comprise local purchasers in the main.

-Now that we are entering a phase of stronger economic growth, some investors are expected to selectively move up the risk curve from core real estate to secondary properties in an effort to boost returns. CBRE expect to see further yield compression of between 25 and 50 basis points being experienced in the Northern Ireland market over the course of the next 12 months on the basis that yields are still attractive relative to regional UK markets and are still some way off their long-term averages. Demand for office investments will increase considering the extent of rental growth that is anticipated for Grade A office stock during 2014.


-CBRE expect to see an increase in the volume of development land being traded in the Northern Ireland market over the course of 2014. The vendors will, in the main, comprise a combination of various banks, receivers and borrowers. Outside of Belfast, CBRE expect to see a continuation of this trend this year. There are several hotel operators looking for opportunities in the Northern Ireland market at present.

-There were a number of hotel and pub properties traded in Northern Ireland in 2013 and CBRE expect to see a continuation of this trend this year. There are several hotel operators looking for opportunities in the Northern Ireland market at present.

According to Marie Hunt, Executive Director and Head of Research at CBRE Ireland, “Technological change and globalisation are the two trends that will dominate the next real estate cycle, affecting each sector of the market in a variety of different ways. Technological change is shaping the office sector as trends such as remote working and hot-desking gather momentum and occupiers use buildings in a different way. It is affecting the retail sector with an increasing proportion of retailing being done online, which in turn is fuelling demand for more modern logistics and distribution facilities. Trends such as an increase in 3D printing and drone delivery of goods will have implications for the real estate sector. Technology is also shaping the way properties are traded with the sale of an increasing proportion of assets now being conducted via data rooms. Just as investors, occupiers and developers have had to adjust in the 25 years since our first Outlook report was written, it is now vital for owners, occupiers and investors to keep abreast of emerging trends to pre-empt how real estate will be planned, designed, developed, occupied, owned and managed over the coming years and decades“

ENDS

About CBRE Group, Inc.
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 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 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 110 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, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.



CBRE Northern Ireland Commercial Property Outlook Jan 2014
CBRE Northern Ireland Commercial Property Outlook Jan 2014