Despite the underlying economic situation in Northern Ireland, there has been quite a bit of activity in the occupier sectors of the property market in the region in recent months.
Indeed, over 20,000 square metres of office lettings were signed in Belfast in the first nine months of 2011. A number of other transactions are currently in negotiations and will be signed before year- end. Air passenger duty is to be cut for direct long haul flights from Northern Ireland from November 1st and it has been confirmed that Continental Airlines’ direct flight between Belfast and Newark will continue to operate. This is very good news for Northern Ireland, particularly considering the region’s current relative attractiveness to multinational investors and employers.
Having been revised downwards over the course of the year, rents, for prime properties at least, now appear to be stable at current levels. Indeed, while rents on secondary buildings remain under pressure, with no new development in the pipeline, we could well see rents for prime office and retail premises increasing somewhat in 2012.
Recent office lettings signed in Belfast include the letting of 929 square metres in two floors to First Source at Oyster House at Wellington Place and the letting of 890 square metres to Grant Thornton at the 10th floor of the Clarence West building. Both of these office buildings are now fully let.
While there are some new entrants, the majority of office take-up in Belfast is emanating from existing occupiers taking advantage of the ability to negotiate favourable leases in the current climate. A number of employers in the region including Capita, PWC, Deloittes and Ernst & Young have recently announced expansion plans, which is very encouraging.
In the retail sector, G-Star Raw have completed the fit out of a new store on Ann Street in Belfast while two new retail stores are currently being fitted out at Arthur Street, close to the Victoria Square shopping centre, for Le Creuset and Jack Wills – their first stores in Northern Ireland. A large extension to the Quays Shopping Centre in Newry is due to commence next year.
In the investment sector, transactional activity remains weak. Transactions completed recently include the sale and leaseback of two Royal Mail facilities in Craigavon and Belfast to private buyers for £1.56 million, reflecting net initial yield of 6.43% and £1.25 million, reflecting a net initial yield of 5.7%, respectively.
With liquidity severely constrained, local cash buyers are predominantly focussed on prime investment assets in lot sizes of up to £2 million.
Above that value, demand is limited to institutional buyers. Indeed, CBRE are currently negotiating a number of transactions in Belfast on behalf of UK institutions. Although conditions in the Northern Ireland hotel sector remain competitive, Belfast is set to host the MTV music awards ceremony later this month, which will undoubtedly provide a significant boost for local tourism and hotels in the run up to the Christmas period.