THE latest snapshot of the Northern Ireland commercial property sector has painted a bleak picture for bricks and motor retail.
Almost two-thirds (64 per cent) of respondents to the RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Commercial Property Market Survey reported demand for retail space continued to fall in the second quarter of 2021.
And despite a slight improvement from the first quarter, most property professionals reported that demand for office space continued to fall in the second quarter (Q2).
But the picture for the north’s industrial property market looked much better over the April to June period, with demand and investment enquiries remaining in positive territory in the second quarter.
The RICS quarterly report weighs up the responses from industry professionals, asking whether demand or enquiries have increased or decreased since the last survey.
A positive net balance denotes more industry insiders reporting improvement, while negative net balances indicate more professionals suggesting a deteriorating picture.
In the case of office occupier demand, the second quarter response came in at -27 per cent.
It comes as a number of high profile office based firms in the north officially adopt hybrid working for staff, reducing the demand for larger space.
Publishing giant Pearson confirmed earlier this month that it will vacate its 16,000 sq ft office at Millennium House in favour of a smaller and more flexible office footprint.
A number of other firms are following suit.
While occupier demand for office space remained in negative territory, the Q2 response was the least negative since December 2019.
Some improvement was also noted regarding expectations for office capital values with a reading of -18 per cent in Q2 compared to -55 per cent in Q1.
RICS and Ulster Bank said it suggested signs of an improving picture as more workers return to the office place.
“Unsurprisingly, demand for industrial space continues to be positive as some of the structural changes in the economy continue to happen,” said Gary Barr from Ulster Bank’s commercial real estate division.
“This continues to impact on the retail sector on the other end, but it is encouraging to note some improvements regarding office demand.
“And as more companies move back to some level of office working, this trend may well continue.”
RICS economist Tarrant Parsons claimed confidence is continuing to recover right across the commercial property market.
“Aided by the growth in online spending seen during the pandemic, demand remains robust throughout the industrial sector, producing strong expectations for both rents and capital values in the year to come,” he said.
“Although, on the other side of the equation, changes to work and lifestyle preferences continue to create challenges for the retail and office sectors, a more stable demand picture coming through across the latter over Q2 just hints that trends may be starting to turn in a more favourable direction.”
