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RESILIENCE CONTINUES TO BE THE KEY FEATURE OF LOCAL COMMERCIAL PROPERTY MARKET

09 January 2018

As 2017 draws to a close amidst a distinctly Brexit-dominated backdrop, it is perhaps timely to reflect on another steady if unspectacular year in the Northern Irish property market. I must admit that it has certainly been an eventful year politically, both locally and on the international stage, something which seems certain to continue for the foreseeable future.

In January, the ‘cash for ash’ scandal brought down Stormont, an event universally criticised by the wider business community, and sadly it seems that yet again egos and ideals have prevented any return to local autonomy, which can presumably only be viewed by outsiders as a damning indictment on our ‘wee country’. Isn’t it ironic that the RHI inquiry has been smouldering away in the background over the past few weeks in quite the most understated fashion? So much so that it has been deemed barely worthy of mention even in our local media and has certainly not attracted any ‘air time’ whatsoever in a UK context, despite being all over the news at the time.

Turning to wider political issues, I feel it is now impossible to deny the reality that the spectre of ‘Brexit’ has had a material impact on our property market over the past year.  Osborne King has witnessed this impact first hand having suffered the loss of two major investment transactions in the early part of 2017 with international purchasers both citing political uncertainty at a local level and the potential implications of our exit from the European Union as their rationale for withdrawal.

That said, I believe it is important to acknowledge the significant local successes achieved within this challenging context, with the standout investment transaction being Wirefox’s acquisition of Castlecourt Shopping Centre in August for a reported £123 million.  Other noteworthy deals include the Tesco Extra in Newry which is believed to have been sold to an internationally based private investor for in excess of £27 million, perhaps demonstrating continued demand for secure income irrespective of the generalities of wider market uncertainty. 

Osborne King can also report encouraging investment activity particularly in respect of resilient local property investors who clocked up more than £70 million in sales in 2017.  Notable acquisitions include the purchase of Cleaver House, Donegall Place, in August 2017 on behalf of an Irish based investor for in excess of £16 million as well as sales totalling c. £20 million across the UK as part of a structured portfolio breakup on behalf of a high profile local property player. We have also witnessed considerable growth in our auction service line, selling 133 lots in 2017 for a cumulative total of just under £20 million up c. 274% on the previous year placing us 6th in the UK according to EI Group.  

Demand from our indigenous entrepreneurs remains particularly healthy in spite of wider market concerns with most local agents/commentators bemoaning the lack of quality product available to satisfy these requirements, a frustration that I fear will continue in 2018.

Following a slow start the occupational market sprang into life in the latter half of the year thanks largely to HMRC’s commitment to their new regional hub currently being developed on Chichester Street, as well as a series of smaller transactions throughout Belfast city centre and City Quays at Clarendon Dock.  Interest in this market remains relatively strong with the lack of supply of genuine Grade A opportunities likely to continue next year, indicating that further rental growth is anticipated as rents push past the £20.00 per sq. ft. barrier.

In retail terms it has been a mixed year with rents, particularly in Belfast, continuing to recover and prime Zone A rents in Donegall Place now sitting at c. £150 per sq. ft., a marked increase over the past 12 months.  In a wider sense, however, the sector does continue to look challenging set against the seemingly relentless rise of online shopping.  The recently announced Toys R Us closures are a stark reminder of the underlying issues and it will be interesting to see if more bulky goods casualties materialise in 2018 post the January sales.

In summary, it seems the key word for our local property market must be “resilience”.  The simple reality is that in Northern Ireland political uncertainty is more or less a constant and within this context our business people, particularly our entrepreneurs, appreciate that life simply has to go on.  It is precisely this determined attitude which will inevitably carry us through 2018, Brexit and whatever happens beyond…

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