INCREASED DEMAND IN OFFICE MARKET BOOSTS RENTAL LEVELS
16 May 2016
Following on from the positive strides made in 2015 the Belfast office market has had a strong start to 2016. The first quarter saw leasing transactions involving approximately 158,000 sq. ft. of office space which represents a three-fold increase on the take-up for the same period in 2015. Indeed, we ourselves were involved in 50,000 sq. ft. of lettings during the first quarter of this year.
We are currently seeing a number of landlords refurbishing city centre offices to meet the increasing demand for good quality space. An example of this is the recent refurbishment of 40 Linenhall Street where the landlord has breathed new life into a former linen warehouse. The unique space has allowed tenants to adopt either a modern corporate fit-out or a “loft style” finish depending on their requirements.
Working as joint agents, Osborne King and Hughes Commercial have delivered lettings to Upstream, Puppet Labs and a Government tenant with another letting due to complete shortly. Not only does this show the increased levels of activity in the market but also that the risk taken by the landlord to refurbish the building and create an attractive marketable space has paid dividends.
Much of recent office market commentary has focused on the lack of available new- build accommodation. At present “The Soloist” which is currently being fitted out internally and “City Quays”, a Belfast Harbour Commissioners’ development, are the only available options which are ready for occupation.
Having developed “City Quays 1” without any pre-lets in place many would have said that the Harbour Commissioners were taking a significant risk but that risk has resulted in reward. In the first quarter of 2016, a further 17,500 sq. ft. of space was leased to BRS Golf and Macom and the 68,000 sq. ft. building is now fully let. Development is also underway at City Quays 2 which will provide approximately 95,000 sq. ft. of accommodation due to be completed in 2017.
There is further evidence that rental levels are continuing to rise as competition for good quality space heats up. We are now seeing multiple transactions with headline rents at or in excess of £17.00 per sq. ft. Furthermore, we are aware of two large corporates who have agreed lease extensions to secure their existing accommodation at £20.00 per sq. ft. This bodes well for the market in general.
In order to make new-build office development viable, rental levels need to be in the region of £20.00 per sq. ft. Based on the indications above the gap between required levels for a functioning market is closing … and fast.
Occupiers may look at this and think “I don’t want or cannot afford to pay £20.00 per sq. ft. in rent”. The response to this is you won’t have to. At long last our office market is showing signs of being two or even three –tiered, providing a choice to occupiers based on budget and location requirements.
On the whole an increase in rental levels should be viewed as positive as it will facilitate better quality working environments in the long run, and hopefully it won’t be too long until we talk about more new-build schemes being underway. All the signs are encouraging- watch this space!