Business

Developers to make move to address office shortage

CBRE said there had been a great level of interest in the Middleton building on High Street
CBRE said there had been a great level of interest in the Middleton building on High Street CBRE said there had been a great level of interest in the Middleton building on High Street

DEVELOPERS are expected to make moves "shortly" to address shortages in grade A office space in Northern Ireland.

The latest report on the commercial property sector by agents CBRE said the lack of supply at the high-end of the office market was "still a notable concern".

It reported the two largest office lettings this year so far was 21,000 sq ft to PwC at Watefront Plaza while IT firm Rapid7 took 11,000 sq ft at Arnott House.

CBRE said it expected "to see more office investment properties coming to the market over the coming months with strong demand prevailing for good office investment opportunities such as the Middleton Building, Belfast, currently being marketed."

CBRE NI managing director Brian Lavery said recent news, "that Invest NI is intending to provide mezzanine funding to support the development of Grade A space has been broadly welcomed".

"However, corporation tax remains the key driver to solve this issue, with the potential to take effect from 2017 – we expect to see developers moving shortly to create sufficient accommodation for the larger, multi-national firms," he added.

The report said there were nine investment transactions totalling £58.6 million completed in the first quarter of the year.

They included Threadneedle’s acquisition of B&Q in Derry for £18m; the government acquisition of Causeway Exchange office building in Bedford Street for £12.15m and the sale of the Linen Green shopping centre in Dungannon to the Neptune Group.

According to the report, activity in the retail sector continued to improve, with regional locations in addition to Belfast, reporting on improvement in tenant demand.

The hotel sector strengthened boosted by events such as the Irish Open and Tall Ships in Belfast.

Mr Lavery added: “The research report has confirmed our confidence that the market has seen a further upturn in 2015. We expect to see more office investment properties coming to the market over the coming months with an increasing number likely to trade off-market.”

“Prime yields for the most part remain stable although there is potential for office yields to contract further over the summer months as new market evidence materialises and further rental growth emerges. As a result there has been a notable increase in demand from local investors in recent months, particularly for lot sizes of up to £10 million.”