Northern Ireland's commercial property market holds big draw for investors says CBRE outlook
THE north's commercial property sector is enjoying a period of renaissance, with investors currently banking some of the highest rates of return of any other region in the UK or Dublin, research from real estate firm CBRE has revealed.
The launch of its 2018 outlook in the Waterfront Hall also heard that a £100 million fund set up last year by the Department of Finance to promote investment, jobs and growth in Northern Ireland, and which is managed by CBRE Capital Advisors, is "close" to making its first big loan.
But the event, attended by more than 400 delegates, heard a caustic criticism of the current political paralysis from CBRE's Belfast office managing director Brian Lavery, who said the last year had been "a maelstrom of uncertainty, indecision and the poorest leadership in memory".
“In the last year we at CBRE, along with our peers in the Northern Ireland business and property world, have had to continually make excuses to potential overseas investor for our lack of local leadership.
“Our success depends on the success of the whole economy and of a whole vibrant society. The exciting and vibrant plans and aspirations put in place by our local councils, for instance, will all struggle in a headwind if we do not have stable government.”
He added: "We have added our voice to the deep concern for this part of the world and, along with other organisations, urge our politicians to finally start representing our joint economic concerns to London and Brussels rather than continually emphasising our differences."
The CBRE report, which has been produced for the last 10 years, showed that prime yields – the annual rent achieved from a property divided by the property's value – are higher across all sectors in Northern Ireland compared to GB and the Republic.
Prime yields for high street shops in Northern Ireland stand at 5.75 per cent compared to 4 per cent in GB and 3.15 per cent in the Republic while for offices, yields in the north stand at 6 per cent compared to 4 per cent in the City of London or 4 per cent in Dublin. Yields are also higher here for shopping centres, retail warehouses and industrials.
Andrew Marston, CBRE's director of UK Office & Industrial Research, said: “On a global basis, we're beginning to see rising interest rates in the US and elsewhere and that will start to weigh on prime yields for commercial property. But in Northern Ireland yields have plenty of cushion and there is a wide arbitrage between Belfast and the likes of London and Dublin.”
That, he added, has helped draw overseas property investment to Northern Ireland, as recent sales have shown (including the £123m purchase of Castlecourt in Belfast by Holywood-based Wirefox, backed by funding from China).
Elsewhere in the commercial property market, Mr Marston said waning consumer confidence is weighing on the retail lettings market while the hotel sector is enjoying growing demand from a steady increase in tourists to Northern Ireland and will soon see an increase in supply from the 1,100 hotel bedrooms which are currently under construction.
In the industrial sector, rents for existing stock are stable at £4-£4.50 a square foot while there is a significant premium for design and build options and in the office sector with take-up reaching 430,290 square feet in 2017.
Also speaking at the event was technology entrepreneur Oliver Rees, co-founder of cyber security platform Hook and freelance innovation consultant, who explored how technology is being embraced by the commercial property world.