19 November 2015

There is little doubt that direct property investment is re-emerging as a preferred investment class due to poor returns on cash deposits and enhanced market sentiment. It’s a case of “back to basics, accepting that it is prudent to take a medium term view on property and acknowledging that capital growth will be steady rather than instant.

At present the Northern Irish property market is being heavily influenced by ‘Loan Sales’. Recent claims surrounding the sale of the NAMA loan portfolio have assisted in bringing this to the attention of the general public, but ultimately the main impact on the market to date is a lack of good quality supply. With this in mind, demand for good quality investment product is outstripping supply; this has resulted in competitive bidding between cash rich investors for the attractive assets that do become available.

Osborne King recently sold an investment on Belfast’s Dublin Road which is let to Tesco and a local pharmacy. The property was brought to the market with an asking price of £2.25m reflecting a Net Initial Yield of 7.28%. Following a competitive bidding process the property was sold for £2.65m reflecting a NIY of 6.18%.

The current level of demand and evidence of tightening yields is further supported by the recent sale of the Caffe Nero and Tesco investments on Royal Avenue, Belfast. On this occasion the sale prices achieved reflected a Net Initial Yield of 5.43%. In reality these yields are considerably tighter than what could have been achieved for similar product 12 months ago.

There is even evidence of this tightening of yields for product outside the city centre as evidenced by the proposed sale of Curzon Buildings on Ormeau Road, which has been agreed well in excess of a price previously agreed following a marketing campaign in 2014. 

In recent months we have also witnessed a significant rise in the acquisition of office premises for owner occupation, with ‘own-door’ offices once a favourite SIPP or SSAS purchase transacting in volumes not seen for quite some time. This is perhaps another indicator that local businesses are starting to exhibit more confidence in property as an investment class.

Following the usual summer hiatus, a steady stream of investment product has come to the market. We are currently marketing 8-10 Donegall Square North, arguably the highest profile city centre opportunity available at present. The property houses the Belfast Welcome Centre, which occupies basement, ground floor and mezzanine levels under a 15-year lease from July 2013 (tenant break option July 2021). The remainder of the building comprises fully fitted vacant office accommodation and we are seeking offers in excess of £5.75m. As we anticipated, there has been considerable interest from local investors; however, we have also been approached by a range of foreign investors keen to acquire prime investment property in Northern Ireland. 

All in all, there are clear opportunities for buyers and sellers in the current market. Anyone who bought a good quality investment or office property during the lower ebbs of the market in 2012/2013 could reasonably expect to see some capital appreciation as the market continues to recover. The outlook is very positive and there is no doubt that good product will be rewarded with strong pricing.

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