NewsMarch JANUARY SPORTS RETAILER DECATHLON FOR HOLYWOOD EXCHANGE European sporting goods giant Decathlon will open its first store in Northern Ireland in May. The French retailer has signed up to take 40,000 sq ft (3,700 sq m) at AXA Investment Managers' Holywood Exchange retail park in Belfast on a 25 year lease. Duncan Mathieson, Managing Director of Realis Estates, which asset manages Holywood Exchange on behalf of AXA Investment Managers, said "this is yet another landmark deal for Holywood Exchange. We were chosen as the location for the very first Ikea in Northern Ireland in 2008 and now Decathlon has also picked the scheme for its debut store. The arrival of Decathlon will further strengthen the tenant line-up at Holywood Exchange and coincides with the opening of a new catering offer that will help boost dwell time and spend at the scheme." Decathlon offers sports equipment and services for the whole family and for all levels of sports enthusiasts – from beginners to professionals. Babar Ahmad, Decathlon UK Expansion Manager, said "we are pleased to have signed up for Holywood Exchange. Our company started out in 1976 in Lille and has now grown to have more than 450 stores worldwide."  Pic: Holywood Exchange - Decathlon Unit Holywood Exchange comprises more than 630,000 sq ft (58,500 sq m) of retail space and as well as Ikea its other key tenants include B & Q, Sainsbury’s, Next and Harvey Norman. In addition, work on a new 10,000 sq ft (930 sq m) restaurant area at the retail park is expected to begin later this year. Harvey Spack Field, Osborne King and CBRE acted on behalf of AXA Investment Managers. For further information, please contact: Colin Mathewson - Osborne King T: 028 9027 0003 E: colin.mathewson@osborneking.com Caroline Kieran - CKPR T: 028 9064 4002 M: 07890 387275 OUTLOOK ON COMMERCIAL PROPERTY: GOING BACK TO THE FUTURE The aptness of the old Chinese curse "may you live in interesting times" has been very apparent over the last 12 months. Nothing has been straightforward and the continued lack of available funding from major financial institutions hampers any significant uplift in transactional business. The recent introduction of legislation in the Irish Republic confirming the statutory power of NAMA to underwrite toxic loans made during the insane property rush between 2003 and 2007 may well stabilise fears of financial meltdown, but also adds a new level of confusion to an already confused marketplace. What is worth buying and what represents fair value in these uncertain times? Some commentators would have you believe that all property is now a risky proposition, and yet the UK auction houses are seeing stellar demand for product that fits investor desire to move money into safe assets with reasonable returns. The key to success is market knowledge, sound advice and experience of how to operate in difficult circumstances. I am all in favour of youthful enthusiasm, and having recently turned fifty would like to be able to turn the clock back a little, but I would not wish to trade any of the experience gained over the last 25 years. At the heart of all investment decisions, property included, lies the assessment of risk and investors’ willingness and ability to absorb the consequences of their decision. Risk cannot always be assessed easily and youthful exuberance rarely errs on the side of caution. Even the world’s greatest golfer has found out over recent weeks that if you believe the hype alongside a sycophantic entourage, you can bring all your successes crashing down around your ears. Tiger's advisors are guilty of ignoring his actions and obviously lacked the experience to assess properly the risk to their investment. Trading our way out of the current recession will be a slow and complex process from which not everyone will emerge unscathed. The development of workable medium to long-term strategies is of paramount importance to property investors who will need to find ways to achieve support from their funders that will enable them to achieve sales and reduce debt. The next 5-10 years will be conservative so really understanding your market and adjusting your pricing to meet actual demand are essential. Over the last number of years, Northern Ireland-based investors have been heavily dependent on extraordinarily high loan to value ratios, and consequently we have been slower than other regions to recognise the need to re-price investment assets. Northern Ireland needs to attract outside investment; in order to do so, we must be priced competitively in comparison to other UK regions. If we do not adjust our expectations, we will not see any significant inflow of cash. Not all sectors of our market are currently flat lining. The office rent review market has continued to show rental growth over the last year and I urge all landlords holding such assets to be well advised as you enter the review process. A clear understanding of the issues and comparable evidence is essential if you are to maximise your assets. Opportunities exist to re-gear leases and trade immediate rental growth for longer-term continuity of income or more advantageous provisions, which can make the investment more saleable in the current market. Seek out the relevant experience if you want to see growth in this sector. Well-secured investment properties of up to £2m are also highly in demand as an alternative to the paltry interest rates currently available. Many investors try to reduce debt burden by attempting to sell their weaker assets whereas they would ease their position faster by selling something the market actually wants to buy. Identifying market opportunity and pricing appropriately will be the difference between success and failure over the next period. This again requires experience and confidence from the advisory team who will ultimately prove their worth if they achieve the strategic goals set. Larger assets require careful structuring in order to place them successfully in the wider UK market. As we enter a new decade, I predict less excitement albeit hopefully more stability in property. Prices have readjusted and a limited number of transactions are being progressed although the pace of play is still heavily dependent on availability of finance. The biggest change will be the re-emergence of old fashioned banking requiring proper business planning and well thought out proposals if developers/investors wish to do business. The age of the "back of fag packet" appraisal and "pretty boy" agent is over. Welcome back experience, warts and all! For further information, please contact: Martin McDowell - Osborne King T: 028 9027 0007 E: martin.mcdowell@osborneking.com Caroline Kieran - CKPR T: 028 9064 4002 M: 07890 387275 THE BOAT - YOUR CHANCE TO GET ON BOARD
For further information on The Boat, please contact: TOUGH TIMES FOR LICENSED PREMISES Over the last thirty years, I have been involved in the sale and valuation of countless licensed premises across Northern Ireland, and during that time I have tried to be realistic in respect of my assessment of the market at all times. During this period, the industry has endured tough times such as the early 90s, but I have never experienced a more challenging period than the past year or so. For those of you working at the "coal face", there is little point in my glossing over the current situation as we all need to face up to reality as it presents itself. The one point that I would stress is that although the credit crunch has had the greatest impact in terms of prevailing difficulties within the licensed trade industry, other factors including the smoking ban and the price of alcohol sold off-sales have also played significant roles. Gone are the days when many of your customers smoked ten cigarettes and drank six pints of beer during the course of an evening at the pub: that customer does not exist any longer. Instead, he or she is opting for a couple of pints in the pub and then returning home to drink alcohol at a cheaper price and enjoy a cigarette without any hassle. Another growing trend relates to the 18-30 age group whereby people will now have a few drinks at home before going out to a pub or nightclub at around 10.00/10.30 pm as opposed to heading out earlier in the evening. During the first six months of 2009, the licensed premises market was awash with rumours regarding various premises being in trouble with receivership reputedly just around the corner. Needless to say, the licensed trade is never short of rumours many of which were either exaggerated or totally unfounded. Unfortunately, the rumour mill was correct in some cases, and after the summer, approximately eight pubs including The Potthouse, Irene & Nans, Café Rouge, all in Belfast, and Kaya in Bangor went into receivership. In my experience, there have never been so many licensed premises in administration or receivership within such a short space of time. I have been involved in the sale, acquisition or valuation of all of these premises, and while the credit crunch has been a major contributory factor, other underlying problems came into play. On a slightly brighter note, not all of these sales were forced: I sold a portfolio of five pubs to Beannchor as well as The Chestnutt Inn in Moira. There are buyers out there, provided you know where to look.  Pic: Kaya, Bangor Whether or not the next year brings another rash of forced sales is difficult to predict albeit in my opinion, we are not finished yet and more casualties may occur within the first half of 2010. While I have great sympathy for those whose businesses collapse, there is little doubt that this also presents opportunities for those in a position to buy. Prospective purchasers also face the hurdle of being able to obtain finance with the majority of banks only considering applications from purchasers with at least 50% equity. The most common complaint that I have heard this year concerns the attitude of banks who are interested in "restructuring your loan", which basically means charging you more for your existing loan rather than lending new money! Meanwhile, the breweries have more or less ceased providing funding to purchasers. In my opinion, the next 12 months will continue to see a realignment of prices with the days of £2 in the £1 of net turnover relegated firmly to the past. On a more positive note, if you are considering selling, make sure that your accounts are up to date and that they clearly show the profitability of your business. I can assure you that buyers still exist, and for those with an eagle eye, there could be a few bargains although unless you are sitting on a mountain of cash, I would recommend that you speak to your bank before undertaking a purchase. The hotel sector in Belfast has also had a difficult year with occupancy levels dropping and having to resort to very aggressive pricing in order to attract business. Whilst it is good to see four new hotels opening in the Greater Belfast area, such as Premier Inn in Lisburn, Ramada Encore at the Cathedral Quarter and the Ibis Hotels at Castle Street and University Street, it is even better for the customer in providing an abundance of choice. It is interesting to note that many hotels are busier from Friday through to Sunday night which is a complete reversal of a few years ago when occupancy levels were higher from Monday through to Thursday driven by the business traveller. By offering attractive packages they have managed to open up a new demand with the strength of the Euro encouraging the Southern market. Hopefully when the economy picks up both ends of the week will be popular as Northern Ireland have the facilities to offer the business and tourist markets. It is my opinion that in general the licensed trade has coped well in the current market and have made stringent efforts to keep overheads down and look for new avenues of business. While the competition between on and off sales is unlikely to disappear it will never prevent people wanting to socialise in pubs, hotels or restaurants. For further information, please contact: John Martin - Osborne King T: 028 9027 0018 E: john.martin@osborneking.com Caroline Kieran - CKPR T: 028 9064 4002 M: 07890 387275 COMMERCIAL PROPERTY OUTLOOK 2010 2009 was a challenging year for the commercial property market in Northern Ireland, with a relatively low level of transactional activity across all sectors. However, confidence is returning and some improvement was evident in the latter stages of that year, in particular within the investment and retail sectors. We expect this to continue into 2010 with the rate of recovery modest, due to the lack of bank finance and the limitations this will place on development and trading opportunities. RETAIL The retail market experienced an unsettled year during 2009, which was most apparent with the high profile demise and re-structuring of a number of well-known brands. However, it is accepted generally that the sector showed real signs of improvement during the second half of the year with a raft of lettings taking place and vacancy levels across the province decreasing significantly. Although rental levels remain depressed and it is certainly still a tenant’s market, an increase in transactions is a healthy sign and it is anticipated that this improvement will be reflected in 2010 with an improved retail environment. As with previous years, the influx of southern shoppers at Christmas has delivered a significant boost to the retail sector and in particular to the supermarkets and “big ticket” retailers including the electrical retailers, Smyth’s Toys and Argos. The penetration of this business into the province has increased beyond the main border towns and cities, with Belfast city centre also benefitting from the additional Euro business. The most significant trend during 2009 was the arrival of the discounter retailers to the province. During the year, B & M Bargains, Poundland, Poundworld, Ethel Austin and T J Hughes all committed to new stores across the province and have been received warmly by the consumer. T J Hughes has taken a major unit at Cityside Retail Park, which is due to open in March 2010. In addition to the discounters, the key opening in Belfast city centre was Hollister at Victoria Square, which has been a major attraction and one of the main reasons for southern Irish shoppers to visit the city centre this Christmas. Republic have also confirmed that they will be opening their first store in Ireland shortly in the unit formerly occupied by Zavvi in Castlecourt at Royal Avenue.  Pic: Poundland It is anticipated that the discounters' appetite for new units throughout the province will continue into 2010 although the main limiting factor in achieving this may well be the availability of suitably sized units. A key issue during 2009 has been the re-alignment of rental values across all retail centres both in and out of town. This has been a painful exercise for landlords, but most have worked hard to overcome vacancies and have retained key tenants where possible. In the current economic climate, and in particular the current banking environment, cash flow and therefore rental income has been crucial to landlords. The outlook for 2010 in the retail sector appears positive with increased tenant demand and lower vacancy levels now apparent. Although challenges remain for landlords in terms of rental levels and incentives required to secure tenants, the market appears to have mainly stabilised. While 2010 will still be a year of tenant opportunity, landlords are now regaining some ground and demand is apparent across most sectors. Colin Mathewson - Osborne King T: 028 9027 0003 E: colin.mathewson@osborneking.com OFFICE The office sector, which had experienced strong growth in both capital values and rental levels 2007/2008, has slowed despite an increase in requirements. A number of high profile office developments including Obel, The Boat, Clarence West, The Soloist and Lanyon Plaza either reached virtual completion in 2009 or will be completed in early 2010. Prime rental levels had achieved £15.00 per sq ft, however, due to the availability of new schemes and financial pressures upon developers, rental levels have fallen back to headline rents of c. £13.50 per sq ft. On the other hand, a number of newly refurbished prime office suites are due to come to the market in 2010 with quoting terms of £15.00 per sq ft.  Pic: Obel, Donegall Quay We currently estimate that the Belfast office market comprises 350,000 sq ft of available space with a further 300,000 sq ft becoming available in 2010 and approximately 1,000,000 + sq ft in planning, however, it is unlikely that this will be developed in the short term due to current stock levels and lack of available finance. As highlighted, the number of active requirements increased notably in the fourth quarter of 2009, which is a positive sign for 2010. Despite budgetary constraints, the public sector has a number of large scale office requirements most notably Northern Ireland Water and the Public Health Agency as well as smaller requirements province-wide whilst the private sector continues to have smaller requirements of up to c. 10,000 sq ft, but primarily in and around Greater Belfast. As a result, both sectors are able to achieve competitive rental and leasing terms and we are aware of existing landlords negotiating on existing terms in order to ensure continuing occupancy. However, it remains essential that landlords take advice to ensure maximisation of existing lease terms including rent review uplifts. Outside the city centre demand for owner occupation has suffered due to the unavailability of finance and whereas values had reached £300.00 per sq ft, capital values have reduced to around £200.00 per sq ft. Despite the intentions of the Bain Report to encourage public sector relocation outside Greater Belfast, there has been limited uptake owing to a shortage of quality office accommodation and the difficulties developers have had in securing finance, particularly for speculative development. In our opinion, speculative development whether in Belfast or further afield is unlikely for the next few years simply due to financial constraints. In conclusion, it is positive to see an increase in the level of requirements, which hopefully will result in a take-up in existing stock, however, we envisage that the office letting market will continue to be testing in 2010. Gavin Clarke - Osborne King T: 028 9027 0031 E: gavin.clarke@osborneking.com INDUSTRIAL The industrial sector has experienced another very challenging year. Average capital values have stabilised, however, rents have decreased, yields have moved out and land values have dropped further. There is now a wide disparity in industrial rents across the country ranging from under £1.00 per sq ft up to c. £4.50 per sq ft. This is dependent not just on the location but also on the landlord. The impact of vacant rates and the increasing surplus of available stock have meant that landlords are more prepared to do more attractive deals; therefore the market has given prospective occupiers a range of options on both quality, price and length of lease. Large industrial sales have been rare. We are aware of large industrial complexes selling for c. £120,000 per acre (excluding the buildings on site) in Ballymoney. The 286,000 sq ft Sanmina Electronics Factory at Ballinderry Road, Lisburn set on 10 acres was sold for £3.5 million in the last quarter of 2009.  Pic: Randalstown Road Business Park At the height of the market, industrial land in Greater Belfast was selling well in excess of £1 million per acre and in a wider Northern Ireland context, in excess of £500,000 per acre with capital values in excess of £100 per sq ft. Capital values now range from c. £40 to around c. £75 per sq ft for new/nearly new stock with older stock as low as c. £20 per sq ft, but again there have been very few actual sales. Average industrial yields now range between 9% - 10%, although there were few actual sales in 2009. The letting side is slightly more encouraging. Osborne King has negotiated c. 40,000 sq ft of lettings in three units in Mallusk over the last six months with another c. 50,000 sq ft under offer at present. We have also let c. 20,000 sq ft of small workshop/storage units in Derriaghy Industrial Park, Dunmurry. The park comprises a total of c.150,000 sq ft of 1960s/1970s buildings, which provides small units offered on economical rents and flexible lease terms from one to three years are filling a gap in the market created by the current economic downturn. The traditional industrial centres of Mallusk and Duncrue continue to have a range of vacant units available as well as a high level of leasehold transactions. The outlook for 2010 is challenging. An easing of fiscal constraints on lending by the banks would be a welcome boost. On balance, we do not foresee a significant uplift, but a stabilisation on 2009 levels is likely. Chris Sweeney - Osborne King T: 028 9027 0032 E: chris.sweeney@osborneking.com INVESTMENT There is no doubt that for much of 2009, the banks' lack of liquidity meant that they had limited funds available for property investment, and this coupled with a drop in the value of assets and related loan to value issues left few people in a position to invest. In recent months, we have noticed a shift in sentiment as some investors who are not restricted by a lack of bank finance have come back into the commercial property market tempted by the opportunity to acquire good-quality product at competitive prices and attractive yields. Institutional investors, pension funds, trusts, cash-rich private companies and individuals are taking advantage of the fact that some sectors of the market, particularly prime property, have experienced a bottoming-out of yields and are injecting capital once more into this sector. Allsops, one of the UK’s leading auctioneers and property consultants, reported total commercial auction sale proceeds for the year as amounting to £446 million, which was a 30% increase on 2008 sales figures. The company attributes this increase to a combination of cash-rich buyers coupled with a restricted supply of properties and realistic pricing, which it claims helped to stimulate sales during the past year. Closer to home, we are seeing a distinct resurgence as private local investors seek good-quality stock. Most recently, a number of sale and leaseback opportunities brought to market by one of the province’s main clearing banks shows that that strong prices are still achievable - indeed, some of the deals in which we have been involved in 2009 support this theory. Notable deals include a local investor’s acquisition of premises within a landmark new town centre scheme in Barking, Greater London in a deal worth £5.3 million, the sale of a property currently let to M&S Simply Food in Coleraine for over £1.75 million and a Sainsbury's foodstore in south-east England for £6.1million. Price yields for these long-let, blue-chip investments typically range between 5-6%.  Pic: M&S Coleraine While there has been a notable increase in investor appetite during the last quarter of 2009, this has mainly been restricted to long-let prime investments. Investors owning assets in other sectors are having to focus extremely hard on managing their assets in order to maximise returns. Now more then ever is the time for sound advice and strategic asset management, an area in which we as a firm have been extremely proactive over the past few years. As banks enter a new financial year, some may opt to clean up their loan books in order to start afresh in 2010, which in itself could bring further opportunities to the market. After all, we should not lose sight of the fact that property historically has been and looks likely to remain a preferred asset class and, as such, is a solid investment vehicle for those who have access to funds. Andrew Coggins - Osborne King T: 028 9027 0022 E: andrew.coggins@osborneking.com LICENSED PREMISES There is little doubt that the leisure sector has been affected by the current economic climate over the past year. A combination of job losses and a decrease in disposable income has had a knock-on effect with many licensed premises having to survive on weekend trade. However, many pub and bar owners have risen to the challenge by introducing promotional offers such as meal deals for £6.95 in order to attract customers through the door. The hotel sector in Belfast has also had a difficult year with occupancy levels dropping and many had to resort to very aggressive pricing in order to generate business. While it is good to see four new hotels opening within the Greater Belfast area including Premier Inn, Lisburn, Ramada Encore, Cathedral Quarter and the Ibis Hotels at Castle Street and University Street Belfast, it is even better for the customer in terms of offering an abundance of choice. Hopefully, demand will grow during 2010 as there is little doubt that Belfast now offers a wide choice of hotel accommodation in first class, purpose-built hotels.  Pic: The Wildfowler Inn During the second half of the year, the recession appeared to bite hard with eight or nine licensed properties sold under receivership with the banks appearing to take the view that since the economy was unlikely to take a sudden upswing, forced sales were the only way forward. On a more positive note, sales did occur during 2009. For instance, Osborne King negotiated the sale of a portfolio of five licensed properties to Bill Wolsey whose long experience within the trade has stood him in good stead. Other sales during the year have proved that a market still exists for good properties. All in all, there is no doubt that opportunities exist and for those with the energy, experience and vision, 2010 may well be a good year to acquire property within the licensed trade. John Martin - Osborne King T: 028 9027 0018 E: john.martin@osborneking.com For further information, please contact: Caroline Kieran - CKPR T: 028 9064 4002 M: 07890 387275 Back to top |
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