DOES OCCUPIER AND INVESTOR CONFIDENCE MEAN OFFICE MARKET FINDING A ‘NEW NORMAL’?
16 August 2022
The first half of 2022 has made it clear that the office is far from a thing of the past. We are now seeing a much more ‘normal’ level of activity in terms of enquiries, viewings and leases being agreed.
Office take-up in Belfast city centre for the first half of 2022 was just over 100,000 sq ft. By way of comparison, before the Covid-19 pandemic, a typical half year would have shown around. 200,000 sq ft of deals. While this is 50% of the take-up we would have expected by the end of the first half of the year, there is a significant backlog of deals that are now progressing.
The main challenge facing the office market in the past 12 months has been speed of decision making by occupiers. Unsurprisingly, it was often easier to do nothing when faced by ever changing protocols, not to mention assessing how individual organisations would utilise their space as hybrid working models evolved.
Quite simply those decisions are now being made and tenants are actively acquiring space. We estimate that there is somewhere in the region of 150,000-175,000 sq ft of lettings agreed and in legals and these should be completed throughout quarter three.
The completion of these transactions will not only move take-up figures towards ‘normalised’ levels but should further increase confidence in the office sector.
The numbers might not be terribly exciting, but there is an interesting story behind each of the transactions with notable occupiers across the legal, tech and financial sectors due to make significant announcements regarding investment, job creation and importantly their commitment to Northern Ireland.
The quality and skill set of our workforce has long been publicised as a key factor in attracting leading global companies to establish a base here, equally the talent available to local companies has allowed them to compete at a global level. As occupiers now get to grips with how to use their office space there are some consistent messages across all sectors which cannot be fully realised through remote working:
- Collaboration and sharing of ideas is vital
- Encouraging and sharing knowledge with younger staff is key to their development
- Recruiting the best talent is made easier when you have a presence and have a space that allows the ethos and goals of your organization to be shared.
These are the key factors now driving occupier decision making and there is undoubtedly a move to high quality space that creates an opportunity for all of the above to happen. It is not just occupiers showing confidence in the office sector. Investors are actively acquiring office buildings and see them as a secure long-term investment.
Imperial House on Donegall Square East was recently sold above its asking price of £6.9m with the yield reflecting sub 6%. Additionally, a significant office and retail investment on Donegall Place/Fountain Street has come to the market at £13.3m showing a net initial yield of 6.5%.
We are aware of other significant office buildings that are likely to come to the market shortly and it is extremely positive to see investors regarding commercial property and the office sector in particular as a good place for their money.
After a turbulent couple of years the office market is finding its ‘new normal’ with the level of take-up, job creation and investment all at very encouraging levels.