New Belfast office developments 'feasible' due to rent rise, Lambert Smith Hampton
INCREASING commercial property rates mean new developments in Belfast are "more feasible than they have been at any time in at least eight years" according to a new report.
Lambert Smith Hampton said average rates were now £17 per sq ft which is still well below other cities in Britain.
The commercial property agents said the onus was now on planners to move swiftly on decisions for projects that will increase the city's supply of Grade A office space.
It said the current requirement for top class accommodation in Belfast was 500,000 sq ft.
Demand in 2015 was 54 per cent ahead of its 10 year annual average, with Belfast City Council’s decision to build a new office complex on the site of Clarendon House the largest transactions in Northern Ireland.
However, the supply of prime office space was down significantly, with availability falling 19 per cent year on year.
The latest Lambert Smith Hampton National Office Market report found Belfast had the third biggest rental increase in the UK, climbing 17 per cent by the end of 2015, compared with an average UK increase of six per cent.
The agency said Belfast had reached a rental price of £17 per sq ft, up from £14.50 last year.
Prime rents are expected to reach at least £18.50 per sq ft by the end of 2016.
This is still well below other cities in Britain with the report finding prime rental rates were £32.50 per sq ft in Edinburgh, £34 per sq ft in Manchester city centre and £30 per sq ft in Birmingham.
Currently Grade A supply in Belfast sits at 275,000 sq ft with much of the stock arranged over small floor plates and across a number of buildings.
City Quays 1, a recently completed Grade A office building of 68,000 sq ft, is now fully let while development has recently started on City Quays 2.
It is hoped a number of other developers will go on site in 2016 to stem the current demand.
With the devolution of corporation tax powers in 2018, the report suggests Belfast may benefit from “a huge additional stimulus” to the market that will boost footloose occupier demand and in turn encourage further property development.
Lambert Smith Hampton's director and head of agency Stuart Draffin said the report "provides encouragement that the market is improving, with prime rents up 17 per cent in Belfast last year".
"The rise is the third highest in the UK and is well above the 6 per cent average of the UK. This reflects a robust confidence amongst occupiers but still keeps pressure on the supply level," he said.
"With the rental market rising, banks are willing to lend again and other investors are also entering the market. That means the pressure to help get new Grade A office space off the ground is now being felt by planners and local councils.
“There is a direct correlation between rental increase and Grade A office space. As prime rents increase more Grade A office space will be made available, which in turn will help Invest NI in its goal of attracting more foreign direct investment to these shores."