A resurgent office investment market – fuelled by unprecedented growth in rental rates – will ensure another positive year for the commercial property sector, leading agency Lisney has reported.

Publishing its latest report, Lisney revealed that investment volumes last year surpassed 2016 to hit £305 million, and predicted that a rise in the number of transactions will see similar levels achieved in 2018.

In its 2017 Northern Ireland Commercial Property Report, Lisney said that, while capital values in Northern Ireland remain “some way off pre-recession levels”, the core local markets “remain robust”. The agency also pointed to a sustained period of growth in the retail sector, where vacancy rates for prime Belfast units stood at 9% at the end of 2017.

Publishing its latest report, Lisney revealed that investment volumes last year surpassed 2016 to hit £305 million, and predicted that a rise in the number of transactions will see similar levels achieved in 2018.

In its 2017 Northern Ireland Commercial Property Report, Lisney said that, while capital values in Northern Ireland remain “some way off pre-recession levels”, the core local markets “remain robust”. The agency pointed to a sustained period of growth in the retail sector, where vacancy rates for prime Belfast units stood at 9% at the end of 2017.

The report said a rise in office investment numbers in 2018 was anticipated “as both vendors and buyers look at the opportunities presented by rental growth in the past 24 months”.

Key findings of the report included:

• Investment volumes across 2017 reached £305m, including £123m paid by Wirefox for CastleCourt.
• Office take-up in 2017 fell to 325,000 sq ft from 535,000 sq ft in 2016
• Vacancy rates for prime Belfast retail units continued to improve, with just 9% unoccupied at the end of 2017.
• Industrial sector performed strongly in 2017 with the sale of the former Coca Cola factory at Lambeg, comprising 266,470 sq ft, the most notable transaction.

Launching the report, Declan Flynn, Managing Director of Lisney Northern Ireland, said:

“Against a challenging economic backdrop, the Northern Ireland commercial property market has remained robust, with investment volumes surpassing the 2016 level to hit £305m. This provided a significant boost in the context of both national and local political challenges, and serves to highlight the strong fundamentals that exist locally.

“The largest transaction of the year was the sale of CastleCourt to local asset manager Wirefox, and it is positive that off-shore equity has chosen to invest in Northern Ireland against the backdrop of a challenging retail investment market in Great Britain.”

Considering the prospects for the wider retail market in 2018, Declan added:

“We are confident that occupier demand for Northern Ireland will increase throughout the next 12 months, with particular focus on the prime and regionally dominant locations.

“Retail investment in key Northern Ireland schemes is likely to generate strong results and, with the letting strategies of assets such as CastleCourt, The Junction, The Boulevard and the Odyssey hitting their stride, we expect to see a number of new lettings announced.

“Lisney’s Annual Retail Study has shown that the trend of reduced year-on-year vacancy continues apace, with only 9% of prime units remaining unoccupied at the end of 2017, compared to 10.5% at the end of 2016.”

Commenting on the prospects for the office market, Declan added:

“The second half of 2017 reflected a more functional office market due to the amount of office take-up, the spread in the scale of transactions and also the mix of indigenous occupiers, along with new market entrants seeking and taking space.

“In what is a welcome development, we have begun to see several Republic of Ireland-based companies making tentative enquiries for office space in Northern Ireland, which we assume is stemming from the potential implications of Brexit. This can only be positive for the sector.”

Looking at the industrial sector, the report found 2017 to have ended on an encouraging note with the fourth quarter showing the highest take-up of space, including the sale of the former Coca Cola factory at Lambeg which comprised 266,470 sq ft.

Providing further industry commentary on the report, Alastair Todd, Head of Property at leading law firm Arthur Cox, said:

“Such in-depth research and analysis into the local commercial property market is to be welcomed, as it provides a further insight into the level of investment being made and the number of transactions being completed.

“Arthur Cox works closely with many of the sector’s key stakeholders and we are fully aware of the galvanising impact on the wider economy that a strong commercial property market can have.

“The retail and industrial sectors in particular are performing very well, and it is encouraging to be able to look ahead to 2018 with confidence.”

Lisney’s latest report on the Northern Ireland commercial property market – the most comprehensive and long-established study across the investment, retail, office and industrial sectors – can be viewed in full here: https://lisney.com/advisory-valuations-and-research/.