All Change In Stormont Executive But How Will It Affect The Local Property Market
10 June 2011As we enter the second month of the new NI Assembly, it is perhaps appropriate to look ahead with some optimism as to how changing political dynamics will impact upon our fragile property market.
Perhaps the most significant cabinet change from a property perspective appears to be the introduction of Alex Attwood MLA as the new Environment Minister. If Mr Attwood is to be true to his Belfast roots, one would expect to see change in planning policy with a possible movement away from the 'out of town' policies associated with Edwin Poots' tenure in favour of an in-town focus.
It goes without saying that for many property- related commentators, urgent attention to our retail townscapes is required in an attempt to arrest the "doughnut" effect which is all too evident in many of our provincial towns. Clearly, the Executive has a duty to navigate its way through very difficult territory in this respect with an absolute requirement to attract inward investment and create jobs whilst at the same time encouraging and supporting indigenous businesses in these most turbulent of economic times.
With this in mind, much has been said of late in relation to the NI Corporation Tax position. As recently as last week in her address to the Stormont Enterprise Committee, Enterprise Minister, Arlene Foster, confirmed her support for a lower rate of Corporation Tax, believing that the economic benefits were likely to outweigh any associated cost.
There is no doubt that the argument has gathered considerable momentum in recent months and this has created the general impression throughout the business community that change is likely to occur sooner rather than later.
From a property perspective this presents an intriguing conundrum, which as yet appears to have been largely overlooked. In reality, the lack of available finance throughout the development sector has created a significant blockage in the general construction pipeline. In Belfast, we are now facing the very real prospect of shortly running out of immediately available genuine Grade A specification offices. Following Osborne King's recent letting of the Obel Tower to Allen & Overy, I can think of only two genuine city centre headquarter opportunities capable of accommodating a requirement of c. 30,000 sq ft, both of which require 'finishing-out' - The Soloist and Lanyon Plaza: widen the net and only The Gateway Building at Titanic Quarter immediately springs to mind.
Irrespective of the tax position, the current commercial reality is that even if debt finance for development was available, current rental levels will simply not support development. We are therefore facing a scenario where we could very quickly find ourselves in the ironic position of being able to offer very attractive tax breaks to large global corporations and not have anywhere suitable to locate them.
In this respect, the new Executive has a pivotal role within current Government policy as the monopoly player in our office market seems intent on driving rental levels through the floor. Given the scenario outlined, this is clearly somewhat counter-productive as unless we can encourage and promote inward investment, our cityscape is unlikely to change for a considerable period of time.