ONLY cave dwellers haven't heard about the lack of grade A office accommodation in Belfast. The shortage has been well documented with the current availability in the city approximately only 265,500 sq ft - or less than one year of take up. While this might appear to be a reasonable stock level, much of this space is actually in small floor plates which are not appropriate for many of the corporate occupiers. Demand is currently outstripping supply and this constrained position will remain until developers source the funding they require to call in the cranes and build new stock.
What is being done to remedy the situation?
Not as much as you may think, or hope, given the current appetite for investment and FDI opportunities in Northern Ireland.
Due to this prevailing position many developers are involved in much head scratching.
If we are not going to be able to secure large scale funding for new development then we should be looking at the refurbishment of some of the existing stock which, with relatively limited investment, could release space to be let. Having made my concerns on the matter clear over the years, I've been looking into any opportunities to better the situation, and relying on some excellent information from Peter Legge, tax partner at Grant Thornton in Belfast, I may have uncovered a benefit of factoring tax into the development appraisal.
It comes via the Business Premises Renovation Allowance (BPRA) scheme of the 2014 Finance Act. Despite the UK government tightening the rules in 2014, due to perceived abuse through marketed investment schemes, BPRA remains a legitimate and extremely valuable tax incentive.
The relief, initially introduced in 2007 for a period of five years and then extended until April 2017, enables commercial landlords of property that has been vacant for a year or more to claim 100 per cent tax relief on significant parts of the capital expenditure on the property's conversion or renovation.
Think of the current grade B and C office stock in the city. This tax incentive was introduced to stimulate income generation in disadvantaged areas across the UK, as it brings obsolete property back into business use.
The official documentation classifies Northern Ireland as being within the 'disadvantaged' category and therefore all buildings including grade B and C office stock have the potential to qualify for the advantageous relief.
With this revitalised stock being brought back to life this would potentially help relieve the pressure on demand.
This is likely to be a growing trend within the local market, and with the benefits of BPRA clear to see, I think it is a trend that will certainly pick up pace in the coming months. We are seeing the major local financial institutions beginning to look at deals again and with office rents set to rise, the business case is more attractive, but in the meantime BPRA could assist developers.
As ever there are restrictions and specific clauses to be considered when availing of this relief. But that's where I pass you over to Mr Legge and his team of tax specialists.
* David McNellis is a director with 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.