ONE of the burning questions facing most commercial property advisers is how to predict the future of the office. Time will tell, but at the moment most businesses are looking forward to a time when they can get their staff back into the office environment.
Zoom calls are a great form of communication, but nothing beats face to face interactions, particularly informal discussions where ideas are shared without the rigid formality of a Zoom call. You should also spare a thought for junior staff and trainees in any organisation as they are meant to learn from their more experienced colleagues, again this is very difficult through a screen.
With the end of lockdown in sight we are hearing more and more from various office users that they intend to fully utilise the space that they have, albeit that the requirement for 9 to 5 working five days per week will no longer be the norm.
Despite the optimism going forward, the take up of office property in the first quarter of this year has been dismal, with a total of 37,200 sq ft being reported over eight deals.
The largest deal was the 11,750 sq ft letting to Bazaarvoice in the East Tower of Lanyon Plaza. Bazaarvoice falls squarely into the technology/software sector, so it's no surprise that it has seen considerable growth throughout the pandemic.
However, even though it has successfully traded with its staff working remotely, it is a huge confidence boost to the sector agreeing to take substantial office space during an uncertain time for office occupiers.
A further sign of confidence in the office sector was evidenced by the recent sale of the Merchant Square office development in the centre of Belfast to a Middle Eastern investor. The £87m sale represents one of the largest office investment transactions to have ever taken place in Northern Ireland, and the yield at just under 5.25 per cent is comparable with yields in major cities throughout the rest of the UK.
Merchant Square comprises 225,000 sq ft of grade A office accommodation and includes six retail units, and the office space is let in its entirety to PwC until 2040, with tenant only break options in 2030 and 2035 and produces a total income of £4.86m a year. Once fully occupied the building will provide accommodation for 3,000 staff and represents a significant investment in the infrastructure of Belfast.
That transaction represents a positive sign in the office market, and with imminent lifting of the work from home requirement, we are looking forward to life returning to Belfast city centre. Steady growth in office take-up and a return to pre-pandemic levels of demand are an essential ingredient in the success of Northern Ireland.
The way we use office space is changing, and the pandemic has accelerated that change as it has in many other sectors of the commercial property market.
And while we cannot predict the way that many organisations will use office space in the future, there is still a deep-rooted need for people to meet and interact to facilitate enhanced productivity and creativity and it is very difficult to do this in the rigid environment at one end of a computer screen.
Declan Flynn (dflynn@lisney.com) is managing director of Lisney (www.lisney.com) in Belfast
