NI property prospects ‘improving’ - IrishConstruction.com - The Business, News and Information Portal for the Irish Construction Industry

Prime office rents in Belfast now stand at £150 per square metre

NI property prospects ‘improving’

The latest Northern Ireland MarketView from property consultants CB Richard Ellis shows there has been improved activity in the property market in recent months after what was a “very challenging period” in the first half of the year.

The report said that while the economy is better positioned than the Republic, demand in the key occupier markets in the region remains weak, with rental and capital values under pressure.

In the office sector, CBRE said, tenant demand has “eased considerably”, putting downward pressure on rental levels which have held up well to this point.

The report states that prime office rents in Belfast now stand at £150 per square metre with further downward pressure “likely” considering the quantum of new office accommodation planned in the region. Compared with a current quoting headline rental level of €430 per square metre in Dublin, these rental levels are “extremely competitive”, CBRE said.

While cross-border grocery shopping from south to north has helped boost retail sales in Northern Ireland in 2009, especially in border towns, CBRE say that many sectors of the retail market are finding trading conditions very challenging.

According to the report, Prime Zone A rents are now on the order of £1,750 per square metre in the region, having peaked at approximately £2,750 per square metre in recent years.

In line with trends seen around the world, prime yields in the investment market in Northern Ireland have “increased significantly” over the past year.

According to CB Richard Ellis, prime office yields in Belfast are currently on the order of 6.25 per cent, prime retail yields at approximately 5.75 per cent, while prime industrial yields are approximately 7.5 per cent.

Meanwhile, CBRE said that transactional activity in the investment market remains very subdued, although there have been a number of sale-and-leaseback deals negotiated recently and there is good interest in some of the investment assets that have recently been brought to market.

Although funding remains difficult to source, investor sentiment and appetite for prime property has improved somewhat in recent months and CBRE expect to see some transactions being completed over the next few months.

Brian Lavery, Managing Director of CB Richard Ellis in Belfast, said: “The first half of 2009 has certainly been challenging for the Northern Ireland property market.

"The occupier markets have seen only limited transactions completed and negotiations becoming extremely protracted. There are reasons to be optimistic, however, as a number of transactions are being negotiated and should be completed in the third quarter,” he said.

“While rental and capital values are likely to remain under pressure for some time, there is strong interest in some of the investment product that has recently come to market including the Richmond Shopping Centre in Londonderry and a portfolio of First Trust branches in the region, which leads us to believe that transactional activity in the investment market will improve this autumn”, he added.

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