LISNEY’S recently launched Q1 2019 investment research noted £41 million worth of deals across a variety of sectors - a relatively modest start to the year, but up significantly on the same quarter last year, which in the context of the political climate is better than we might have expected.
Aside from a portfolio of petrol filling stations sold by Lisney, a notably absent sector was traditional retail. No shopping centres, retail parks or indeed high street shops traded in the first quarter, a theme which is mirrored across the UK with the sector seeing the lowest quarterly volumes trade for a decade.
Whilst headlines are dominated by retailers struggling to adapt, we sometimes miss out those who are giving the consumer something different and responding to the change in how consumers want to interact with retailers. Whether that’s cheap fashion or an experiential environment, our shopping centres and high streets have plenty of examples of quality retailers, trading sustainably. Perhaps not a headline grabber, but it is true.
Let’s not get carried away, retailers are and will continue to rationalise store portfolios in the future, meaning more regional or secondary locations will have to condense their retail offer. However, quality retail destinations remain attractive propositions for retailers, and with this core fundamental intact then they will in time, once again, become attractive for investors.
This is easy said, but there are some statistics to support this assertion. Out of the nine major retail Company Voluntary Arrangements in 2018, Great Britain saw 20 per cent of those store portfolios close compared with only 10 per cent in Northern Ireland and over the last five years Belfast’s occupancy has improved year on year and by 10 per cent overall.
And what of our believed to be beleaguered investment market?
Well, let’s put it in context. MSCI is a global property index provider, relied upon by investors and fund managers across the world to benchmark returns across different geographical locations. Lisney along with a number of other commercial property advisors support the collection of data in conjunction with the University of Ulster to produce the index for Northern Ireland.
The 2018 index, launched a few weeks ago, revealed that “income returns” for Belfast were the strongest of all key European Cities. The report also highlights the challenges facing retail, but notes that outside of London, we had the most resilient retail market in the UK. The contraction in capital values is an issue in the context of overall returns, but none the less we can take positives, even in the midst of this “retail storm”.
Therefore, whilst we are all aware the sector faces challenges, we have to look beyond the next six months, cognisant of the relatively robust performance of Northern Ireland through 2018 and see where the potential opportunity lies.
We have to focus on the tentative momentum around restoring our Assembly which could trigger £2bn worth of infrastructure spending, a sensible end to the Brexit process, City Deals, tourism numbers, FDI success….. All of which provide momentum and a positive narrative for those investors willing to look beyond the headlines.
:: Stephen Chambers is an associate director of Belfast-based commercial property agency Lisney, which works on behalf of many of Northern Ireland's most significant investors and developers as well as major retailers and businesses.
