THE SPACE RACE
09 December 2014Having started my career at Osborne King in July 2007 it’s been an interesting seven years. As a ‘wet behind the ears’ graduate, I arrived into a market which was experiencing unprecedented growth as evidenced by the large-scale construction projects appearing on the Belfast skyline. Victoria Square was underway, work on the Obel and the Boat buildings had started - little did I appreciate what lay ahead in the following 18 months not only for the property market but for the wider economy.
In the last seven years, Belfast has become a very different place; in my view a much better place. It’s great when friends who left Belfast for opportunities in Dubai, London and New York return and can’t believe the changes. Admittedly we still have a way to go before we are a truly cosmopolitan city but we are getting there. We have some top quality bars and restaurants and an expanding range of cultural activities.
Whilst this might seem all very nice in isolation, when it’s combined with the fact that we have the lowest office rents of any UK city and a ready supply of quality graduates, it is easy to see why established UK and international companies view Belfast as an attractive proposition. There has been a marked increase in the number of office requirements throughout 2014, with a considerable number of occupiers looking to relocate or set up a new operation come 2015.
In an ideal world occupiers want modern ‘Grade A’ accommodation, however, at present there is very little of this in Belfast. Put simply, demand significantly outweighs supply and this is finally being reflected in ‘quoting rents’ and proposed deals. Typically quoting headline rents are now in the region of £15.00 per sq ft; excellent value for money in comparison to other UK regions. For example current headline rents in Glasgow sit at £27.50 per sq ft, in Leeds it’s £25.00 per sq ft in Cardiff it’s £22.00 per sq ft. In fact our closest competitor in terms of cost is Nottingham at £19.50 per sq ft.
Global firms such as EY and Deloitte have significant requirements for ‘Grade A’ space, as do Belfast City Council; space that doesn’t currently exist. In order to rectify this shortfall some city centre buildings will be refurbished - the problem is that due to physical constraints very little of our existing building stock can be refurbished to a true ‘Grade A’ specification. Ultimately new-build development is required, however for office development to be viable, rents need to be much closer to the UK levels stated above.
At present the only major new build project is ‘City Quays’ at Belfast Harbour which is well underway. Baker McKenzie’s recent announcement that it has agreed to take 28,000 sq ft of office space provides evidence that there is merit in speculative office development. Belfast Harbour is in the advantageous position of having a significant land bank, not something that can be said of the private sector.
The influx of companies coming to Northern Ireland is an extremely positive development and will assist wider economic recovery, however we must not forget existing NI companies that have weathered the storm and are looking forward. After a significant period of consolidation many are looking towards expansion and we would urge anyone within this category to start looking at options sooner rather than later.
In Q3 of 2014 office uptake was approximately 120,000sqft in Belfast city centre. To put this in context the combined uptake for Q1 and Q2 was less than 100,000sqft. The market is moving.
We have all become accustomed to the phrases like ‘sentiment’, ‘green shoots’ and ‘optimism’ being used in the media. Now we can point to actual evidence of the office sector moving forward.