Northern Ireland | Focused on the horizon


Politically the most exciting development within Northern Ireland has been the creation of 11 super councils (down from 26 District Councils) and in particular the empowerment of Belfast City Council, which for the first time in its executive history assumes planning and regeneration powers. The devolution of greater powers to these new Super Councils will, in our opinion, fast track development and bring a particular focus to local property issues.
 

INVESTMENT SENTIMENT
 

Investment property transactions in 2015 exceeded £450 million across all sectors, with a number of ‘first time buyers’ new to the Northern Ireland market.

Private Equity remained the most prominent purchaser during 2015 seeking the opportunity to reposition assets through proactive management. The next 12 months is likely to see a plateau in transaction levels as asset management strategies are implemented. However, we envisage 2017 witnessing re-trades to institutional buyers once asset management strategies are completed.

2014 was the high water mark of bank deleveraging, establishing the highest level of transactions since 2003 with almost £500 million of sales being completed. We forecast the arrival of a more sustainable investment market supported by steady and a more continuous offering of product as opposed to the sharp product peaks and deep product troughs evident throughout the last four years.

OFFICES IN DEMAND
 

The success of Northern Ireland and specifically Belfast in attracting foreign direct investment jobs in record numbers has created pressure on the supply side of the market, with a now extreme shortage of Grade A office buildings offering floor plates of 10,000 sq ft plus. We expect this demand to create upward pressure on rental levels with new headline figures being achieved.

A potential ‘game changer’ for the sector is the reduction of Corporation Tax to 12.5% which will open doors to compete for and attract, new operations, which are tax sensitive. The delivery of this Corporation Tax rate cut is now set for April 2018 and this will undoubtedly increase interest/ demand in the proposition offered by Northern Ireland and Belfast city centre in particular.

A shortage of stock has prompted anticipation of schemes to come, but speculative office development remains limited and currently Belfast Harbour is the only party bringing new space forward in 2016.

The lack of new development being brought forward has led to a number of major occupiers (Allstate & Concentrix) procuring their own bespoke office space via self-build processes.

RETAIL
 

The retail market across Belfast city centre has witnessed a year of consolidation with Donegall Place, the city’s traditional prime retail pitch, being once again fully occupied. Gap, Skechers and DW Sports have all opened new stores, and a significant up-size and refurbishment by Zara has created a positive view of the city centre retail market with Zone A rents stabilised around £125 per sq ft.

The momentum of the business rates revaluation in April 2015 has generated activity across the city centre from new retail entrants who include; Michael Kors, Tiger, Warren James and Schuh Kids.

INDUSTRIAL
 

A lack of modern distribution warehouse space is an inherent issue within the sector, but with occupiers unprepared to make long term commitments (10 years +) it is unlikely that new space will be delivered in the short term.

The industrial market remains dominated by a combination of third party logistics operators, global manufacturers and local businesses. The latter group have continued to be particularly active over the past 12 months making opportunistic purchases at or below build costs to house existing trading businesses, purchasing properties from administrators or receivers.

DEVELOPING MIXED-USE
 

The on-going development of a new enlarged city centre University of Ulster campus which will bring 15,000 students into the North side of Belfast city centre by 2018 has acted as a catalyst, bringing forward a range of new mixed-use development proposals.

A number of established UK student housing providers have acquired sites, lodged planning applications and in some cases commenced development across the city centre; an exciting change which can only assist in bringing forward additional development and investment, specifically within the leisure sector.

As of January 2016, there are five ‘live’ planning applications for new hotel developments across Belfast city centre which, when complete, will deliver an additional 1,200 bedrooms. There is active demand from a number of International hotel brands who are currently not represented within the city and we see this interest translating into transactional activity in 2016.

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