Office lettings spiral in first quarter as Belfast Telegraph prepares to move out
MORE than 160,000 sq ft of prime office space was let in Northern Ireland in the first three months of the year - not far shy of the total for the whole of 2015.
And research by commercial property agents Lisney shows that investment levels reached £120m during the quarter, with deals worth another £140m still waiting to be signed off.
Among the headline deals was one which sees the Belfast Telegraph vacate its sprawling Royal Avenue headquarters (it was acquired earlier this year by developers McAleer & Rushe) to move to a much smaller base.
The publisher is in the throes of relocating to 17,500 sq ft of office space at Clarendon Dock, from which it will be running its papers from early summer.
It is also understood that software firm Liberty IT has signed up for an additional 26,000 sq ft of space in Adelaide Exchange base in Belfast city centre, while the Department for Social Development is taking 23,000 sq ft at Cleaver House in Donegall Square North.
Other significant transactions currently on the market include Damolly retail park (asking price £33.5m), Citi's Gateway Offices (£29m), Lisnagelvin shopping centre (£17.2m) and Downe retail park (£17m).
“The Northern Ireland commercial property market has enjoyed a buoyant 2016 thus far, driven largely by sustained investment transaction volumes and private equity funds selling out their loan books," Lisney's managing director Declan Flynn said.
“Cerberus has been particularly active in this period, agreeing the 15-acre Sirocco Site opposite Belfast's Waterfront Hall, the Castlebawn development site in Newtownards and the long-awaited Royal Exchange development site in Belfast city centre.
“Encouragingly, demand remains strong for assets which are currently on the market and priced correctly. The purchase of Bloomfield shopping centre at a yield of 7.66 per cent provides an indication of the opportunities which the region currently offers, while illustrating a tightening of the yield gap with comparable UK product."
But he cautioned: “While this encouraging start to 2016 paints a positive picture for the market for the rest of the year as a whole, we predict the number of investment transactions will decline in the next few months before recovering again towards the end of the year.
“The reason for this is the uncertainty which abounds, ahead of the European Referendum, about the potential impacts of Brexit. We expect that most investors will take stock and await the outcome of the EU vote, as well as local elections, before making any further investment decisions.”
Mr Flynn added: “The restricted supply of grade A office space got continually worse throughout 2015 and this has been compounded further in recent months. In the absence of new developments coming to the market, the gap between demand and supply will undoubtedly grow.
“Our research tells us there are a number of active requirements which the current supply cannot fulfil, notably that of HMRC seeking 100,000 sq ft of grade A space. This shortage will put further pressure on rents, which have been rising steadily since 2014."
Headline findings from the Lisney report include:
• Investment volumes during the first quarter of 2016 reached £120m, with a further £140m currently on the market.
• The largest investment of the year so far has been the £54.15m purchase of Bloomfield Shopping Centre by Elandi with Tristan Capital.
• The take-up of office space reached c.160,000 sq ft in the first quarter of 2016, the majority of which was made up of refurbished existing space rather than new builds.
• Demand continues to be strong for prime city centre retail pitches, although vacancy rates are declining further.
• Limited supply of industrial space and a weakness in demand from manufacturers, caused by low oil and commodity prices, led to very few industrial transactions of note completing in the first quarter of 2016.