POSITIVE SIGNS FOR PROPERTY IN 2017
18 January 2017Overall, last year was a positive one for commercial property and an improvement upon 2015, and while the immediate fall-out from the Brexit vote appeared to have had a negative impact, it was very much a case of business as usual towards the end of 2016.
The office, investment and hospitality sectors were the most active during the year. City centre office take-up in 2016 was c. 435,000 sq ft up from 310,000 sq ft in 2015, much of which was acquired by service sector companies such as Liberty IT and Citi Group which took 26,000 sq ft and 16,500 sq ft of new space respectively. We expect to see continued expansion in this sector during 2017.
The hospitality sector experienced a significant resurgence with a plethora of new hotels either gaining planning approval or under construction and a mid-year announcement that the Marriott Group plans to enter the Northern Irish market for the first time.
Getting the year off to a positive start is the sale of Laganview House, a landmark building on Ann Street and Oxford Street, which we sold for £1.4 million, comfortably over the £1.25 million asking price. The property attracted keen interest from local and UK investors and represents an exciting refurbishment/development opportunity that will further enhance Belfast’s waterfront area. This sale bodes well for 2017 as there is a clear appetite for similar opportunities with specific focus on the office and leisure sectors.
In Northern Ireland we are no strangers to political uncertainty which is probably just as well given our current predicament. Once again our inept political leaders have created significant challenges for the local business community. Added to the unprecedented events of 2016, uncertainty is going to prevail across several landscapes.
One thing we can be sure of is the resilience of local entrepreneurs and their businesses, and the fact that irrespective of political inertia they will continue to strive for growth and progress.
Admittedly, there has been some concern that Foreign Direct Investment will decline following the US election result as the new administration seems likely to encourage US firms to remain in North America. Time will tell, however it is important to note that Invest NI has attracted a significant number of potential office tenants in Northern Ireland over the last few months and active requirements for Grade A office space continues to increase.
Generally speaking, there are ample signs that the Northern Ireland property market will continue to improve in 2017. Rental levels are now consistently in excess of £17 psf, and following KPMG’s leasing of space in Belfast’s Soloist Building at a headline rent of £21.50 psf, there is every reason to believe that similar rental figures are achievable this year for Grade A office accommodation. This increase in Grade A rents will have a knock-on effect for Grade B/refurbished space and we would expect rents for this type of accommodation to be in the range of £16 - £18 psf dependent on location.
With vacancy rates down in most sectors and increasing appetite from lenders, we see 2017 presenting a good opportunity to invest. As always, a sound understanding of property fundamentals is a must and we anticipate a continued flight to quality in this area.