WITH Northern Ireland being the UK’s only land border with Europe, its position in the uncertainty associated with Brexit has been amplified - and regardless of the industry, this backdrop makes investment decisions very difficult, particularly in commercial real estate.
In an investment sector weighted so heavily towards larger property transactions, often involving investors from outside of the region, it’s not surprising to see the effect this has had in the last quarter, muting activity levels to just £18 million.
This illiquidity has created opportunity for some investors however, who can take a longer term view and when combined with softening pricing it has compelled them to look seriously at the region in the hunt for yield. The recent sale of Crescent Link retail park in Derry is a good example of that.
But it would be unreasonable to blame it all on Brexit. Northern Ireland is traditionally dominated by retail led transactions, and given slowing consumer confidence, cost price inflation and a structural shift in how we shop, the sector has seen a significant pausing in the last 12 months. This sentiment is mirrored right across the UK as occupier administrations continue to worry investors.
We have said before though that if investors scratch the surface, there is in many cases a more resilient occupational story in Northern Ireland than comparable cities in GB, which will be critical in helping the sector attract capital following the emergence of some political certainty in the coming months.
Northern Ireland’s star sector over the last few years has been offices, though it has seen a drop of in the take up figures assessed within central Belfast for quarter three of this year.
This is not just a reflection of the continuing uncertainty in some sectors over Brexit but also the shortage of supply. While a recent report by AIB commented that half of small businesses in Northern Ireland are already suffering in some way due to Brexit it is positive to note the continued investment form the tech and digital sectors highlighting just how robust they are.
Lisney’s quarterly research shoes the total office take up for Q3 was just over 63,000 sq ft across 11 separate transactions, bringing the total take up across the first three quarters of 2019 to just over 245,000 sq ft.
This represents a significant drop in space transacted compared to the same time last year but it’s worth bearing in mind the nature of this market is that larger deals can change the picture very quickly.
Considering current activity it is anticipated that the annual take up by the end of Q4 will demonstrate a figure close to, if not exceeding, the five-year annual average.
We still face challenges in the lack of supply of larger floor plates, especially in an FDI context, where many such requirements can be in excess of 20,000 sq ft.
Belfast has very few options of this size, and with that in mind it is anticipated that pre-let or mid-let activity will heighten as occupiers compete for space.
Stephen Chambers (schambers@lisney.com) is associate director (investment & property finance) at Lisney in Belfast
