Commercial property is a hedge against inflation - and no permacrisis

The Premier Inn Four Corners Hotel in Belfast's Cathedral Quarter, which was sold for £12.2m
The Premier Inn Four Corners Hotel in Belfast's Cathedral Quarter, which was sold for £12.2m

THE Collins English Dictionary has introduced a single word to represent 2022. It's 'permacrisis', which is defined as “an extended period of instability and insecurity”.

The news is continually full of gloomy reports on Brexit, Covid, rising inflation, interest rates, energy costs, tax hikes, impending local elections along with global insecurity.

The current news headlines remind me of the daily briefings from the then Prime Minister of the UK, Boris Johnston, warning of the impending doom in 2020.

Just over two years since the news was dominated by the Covid crisis, little is heard about it now, the media has moved on and the impending doom has not happened, or at least not to the extent that the media pundits predicted, in their efforts to sell papers and generate viewer numbers.

There are undoubtedly numerous headwinds facing the economy as we bounce along in our state of permacrisis and as a direct result the commercial property market is facing levels of uncertainty, not seen since the last financial crisis in the late noughties.

Despite this we have seen over the last few weeks in Northern Ireland the sales of Rushmere shopping centre for £56m and The Four Corners Premier Inn Hotel in Cathedral Quarter for £12.2m.

There have also been other significant off market transactions, including the sale of Weavers Court Business Park on the edge of the city centre and the sale of the 21,000 sq ft Longbridge House in Cathedral Quarter.

The backdrop to these significant investments in commercial property, according to official figures produced by the Northern Ireland Research and Statistics Agency, is that the local economy was officially in decline in the second quarter of 2022. It is widely expected that when up to date figures are released for the third quarter that the economy will technically be in recession.

Even with this backdrop and the limited debt market, there is still significant interest in the almost £200m of commercial investment property that is currently on the market in Northern Ireland, with a number of these properties currently sale agreed and working their way through the sale process.

The level of demand, particularly from local companies with strong balance sheets, is in the main driven by property in general, and particularly commercial property being seen as a significant hedge against inflation.

Whilst the UK government, particularly the Conservative Party, is experiencing a period of permacrisis for the first time in 2022, this is not something new to us in Northern Ireland.

Our political system has been in a state of permacrisis for years, but we have managed to navigate a way through this and maintain a level of economic activity which many pundits have predicted was impossible.

With that backdrop in mind just imagine where our economy would be if we had politicians who strived to improve the economic environment for all, rather than just focus on their need to be re-elected by their hard-core supporters.

Declan Flynn is managing director at Belfast commercial property agents Lisney.