It’s a mixed pic­ture for prop­erty sec­tor

Lis­ney’s Nick­yfinnieston looks at the com­mer­cial prop­erty land­scape in light of the agency’s role in the sale of Belfast’s Metro Build­ing, the big­gest deal of the year so far

Belfast Telegraph - Business Telegraph - - Front Page - By nicky finnieston, Lis­ney Nicky Finnieston is Lis­ney’s in­vest­ment di­rec­tor

Lis­ney’s nicky finni­est on look sat the com­mer­cial land­scape after the big­gest deal of the year so far

Whilst North­ern Ire­land was bask­ing in some of the high­est tem­per­a­tures ever recorded in the re­gion, this sum­mer also saw ac­tiv­ity heat up in the com­mer­cial prop­erty mar­ket.

In Septem­ber, the sale of the Metro Build­ing on Done­gall Square South cur­rently oc­cu­pied by Capita, the News Let­ter and its owner John­ston Pub­lish­ing and Yell, marked the largest deal of the year so far. The 70,000 sq. ft. Grade A of­fice as­set was pur­chased by a pri­vate prop­erty trust which paid well over the £21m ask­ing price in the face of sig­nif­i­cant com­pe­ti­tion.

This was pre­ceded by high pro­file in­vest­ment ac­tiv­ity in June and July which saw French as­set man­agers, Co­rum As­set Man­age­ment, en­ter the North­ern Ire­land mar­ket with its £16.4m ac­qui­si­tion of 40-46 Done­gall Place, cur­rently home to Next and Ea­son, and the £15.2m sale of Obel 68 to Belfast Har­bour.

Sit­ting ad­ja­cent to the Obel Tower, Obel 68 com­prises 52,000 sq ft of Grade A of­fice ac­com­mo­da­tion ma­jor­ity let to in­ter­na­tional law firm Allen and Overy. Belfast Har­bour saw off com­pe­ti­tion from nu­mer­ous bid­ders to bring the as­set back into lo­cal own­er­ship, and with the Har­bour al­ready own­ing the City Quays de­vel­op­ment in Claren­don Dock, this fits well with the strate­gic busi­ness plan for the area.

Co­rum As­set Man­age­ment’s en­try to North­ern Ire­land was par­tic­u­larly in­ter­est­ing as it marked only its sec­ond pur­chase in the UK, un­der­lin­ing the op­por­tu­nity North­ern Ire­land of­fers for com­mer­cial prop­erty in­vestors. From iden­ti­fy­ing and agree­ing the deal, this trans­ac­tion, which to­talled £16.4m, com­pleted within one month.

These three as­sets equate to more than £50m be­ing trans­acted since June. This cov­ers ap­prox­i­mately 189,000 sq ft of prime of­fice and re­tail space within Belfast city cen­tre.

So whilst in­vest­ment ac­tiv­ity was slow at the start of the year, as has been a trend over the last num­ber of years, in­vest­ment vol­umes look set to im­prove to­wards the end of the year with sev­eral high pro­file of­fice and re­tail as­sets be­ing pre­pared for sale be­fore year end, the largest of which is Cres­cent Link Re­tail Park in Derry Lon­don­derry.

Also of note is the con­tin­u­ing demand from lo­cal in­vestors for bank­able as­sets at a lower lot size. After sell­ing a num­ber of these over the sum­mer, we are en­cour­aged by the con­tin­ued demand in this space.

Whilst de­ci­sion mak­ers within the in­dus­try are cer­tainly be­com­ing more and more mind­ful of the pend­ing March 29, 2019 Brexit dead­line and the lin­ger­ing un­cer­tainty, in­vestors are recog­nis­ing the core fun­da­men­tals of the lo­cal mar­ket are ro­bust. Clar­ity re­gard­ing ‘ the deal’ and of course, Stor­mont, is re­quired to main­tain the mo­men­tum of re­cent months.

The of­fice mar­ket re­mains ar­guably our most buoy­ant sec­tor, with the first six months of 2018 record­ing the high­est half year of­fice take up lev­els (538,646 sq ft) since Lis­ney be­gan its com­pre­hen­sive North­ern Ire­land Com­mer­cial Prop­erty Mar­ket Re­ports in 2012. This fig­ure is com­pa­ra­ble to 326,000 sq ft for the first six months in 2017, and 535,000 sq ft in 2016 — a close sec­ond to the 2018 volume. Take up vol­umes range from sub 1000 sq ft to 149,200 sq ft and whilst tech­nol­ogy, me­dia and tele­coms con­tinue to dom­i­nate, ac­count­ing for al­most 50% of of­fice take up so far this year, a grow­ing ap­petite for col­lab­o­ra­tive work­ing space is emerg­ing lo­cally.

Supply re­mains an is­sue with no ‘new’ stock sched­uled to be avail­able to oc­cupy this side of 2019, when we hope to see a num­ber of newly re­fur­bished build­ings open their doors, in­clud­ing Chich­ester House at 48,000 sq ft, Ar­tola House at 19,000 sq ft and Moneda House at 17,000 sq ft.

On a longer finger, plans have been sub­mit­ted for the re­de­vel­op­ment of the former Belfast Telegraph build­ing, to be re­named, ‘ The Sixth’. This re­gen­er­a­tion of the land­mark build­ing, which is be­ing pro­moted by Belfast City Coun­cil in part­ner­ship with Mcaleer & Rushe, will bol­ster the city with an in­cred­i­ble 230,000 sq ft of workspace. That’s all in time for a pre­dicted up­lift in head­line rents which are ex­pected to rise from ap­prox­i­mately £21 per sq ft in 2018 to £23 by 2020. But be­yond the heat­wave, ar­eas of low pres­sure have gathered over the re­tail sec­tor which con­tin­ues to be dom­i­nated by Com­pany Vol­un­tary Agree­ments (CVAS) and re­struc­tur­ing. Belfast city cen­tre has, by and large, so far emerged un­scathed from the re­cent wave of CVAS, the fire which de­stroyed the Bank Build­ings in Belfast, oc­cu­pied by Pri­mark, has wreaked havoc for many city cen­tre re­tail­ers.

The CVAS have cre­ated op­por­tu­nity for some re­tail­ers, namely Pound­stretcher, B&M Bar­gains and The Range, all of which have been ac­tive in tak­ing space. Cafes and food out­lets have ac­counted for a lot of ac­tiv­ity in this sec­tor so far this year both in the city cen­tre and at shop­ping cen­tres, such as Tony Mac­a­roni open­ing at Ban­gor’s Bloom­field Shop­ping Cen­tre, Pizza Punks land­ing in Belfast’s Long­bridge House, and two new Ground units in Vic­to­ria Square and on Main Street, Ban­bridge.

On the in­dus­trial front, ac­tiv­ity has slowed slightly fol­low­ing a strong start to the year in­clud­ing the first com­mer­cial data cen­tre be­ing opened in Col­eraine by 5NINES, Queen’s Univer­sity Belfast open­ing a £7.5m ad­vanced man­u­fac­tur­ing fa­cil­ity and In­vest NI of­fer­ing sup­port to six lo­cal man­u­fac­tur­ing com­pa­nies for ex­pan­sion and job cre­ation. How­ever, we do be­lieve demand will in­crease mir­ror­ing trends in the UK and Repub­lic of Ire­land, mak­ing it a sec­tor to watch in the com­ing months.

All in all, the com­mer­cial prop­erty mar­ket is ex­pected to re­main ro­bust over the rest of the year, most likely on a rea­son­able par with 2017. With un­cer­tainty sur­round­ing Brexit and a com­plete lack of lo­cal govern­ment, the per­for­mance of the mar­ket has been a pos­i­tive for North­ern Ire­land in re­cent months. As­sum­ing a sen­si­ble ap­proach to our po­lit­i­cal ob­sta­cles we are op­ti­mistic that the mar­ket will con­tinue on its growth tra­jec­tory and achieve its po­ten­tial in the com­ing years.

From left: Metro Build­ing, Obel Tower and (be­low) Ea­son lo­cated at Done­gall Place

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