BUSINESS FIRST NORTHERN IRELAND ECONOMIC OUTLOOK 2017
Northern Ireland should expect a strong 2017 for commercial property despite a stuttering 2016
by Brian Lavery , managing director , CBRE Northern Ireland
T
he commercial property market in 2016 showed encouraging activity despite the threat posed by a number of events . The best performances came from the office , retail and industrial occupational markets .
Unfortunately , Brexit caused a great deal of uncertainty in the investment markets in particular both pre and post referendum vote and this resulted in a lower level of deal volume particularly towards the end of the year .
Shortage of Grade A office accommodation was and continues to be a factor in the office sector with demand far outstripping supply once again .
However , one of the more positive developments of 2016 was a multitude of activity in refurbishment of secondary office accommodation to a Grade A standard including the Linen Loft offices on Adelaide Street and planning permission granted for a number of significant developments including 90,000 sq ft at River House on High Street and 160,000 sq ft at Oyster House , Wellington Place .
A number of new office entrants were announced in 2016 which will translate into transactions in 2017 . In addition to the new entrants , several large requirements are remain live , and this together with a number of lease events will drive demand over the course of the next couple of years .
This should result in a higher volume of leasing activity this year than in 2016 , with some preletting activity anticipated .
Landlords will need to pay more attention
34 www . businessfirstonline . co . uk to the requirements of their workplaces going forward . Energy efficiency and sustainability are increasingly becoming hotbutton topics , particularly with the new Energy Performance directive due to come into force in 2018 .
In addition , office tenants are increasingly demanding more flexibility which means that office buildings being constructed now have to be designed with adaptability , with efficiency of floor plates and productivity of the workforce in mind .
The unexpected events of 2016 saw an unlikely boost to retail due to the ongoing implications of the referendum result .
Since the Brexit vote in June , the fall of the sterling has seen an encouraging increase in the number of crossborder shoppers which is strengthening the retail schemes in border towns and cities such as Newry , Enniskillen , Strabane and Derry . Belfast also has benefitted from an increase in shoppers and number of key openings in the City Centre last year included Stradivarius , Sostrene Greene , Toys R Us , Patisserie Valerie , The Entertainer , Kiko Milano and Moss Bros .
The investment market was hit harder than other markets by the uncertainty caused by the Brexit result , with c £ 255 million invested across 46 transactions . Several significant deals that were due to complete by yearend were either cancelled or put on hold as many investors felt it was too great a risk .
Institutional investors have for the most part avoided taking any risks , with most
buyers in 2016 comprising Northern Irish high networth individuals , private equity groups and property companies .
A strong occupational market , stable prime yields , low interest rates , and excellent affordability due to the weak sterling made Northern Ireland a very attractive prospect for investors and will continue to do so in 2017 .
The anticipation for transactional activity in 2017 is that the majority will come from financial restructuring and investors crystallising profit following the completion of asset management strategies .
There will continue to be a healthy interest in the investment market in Northern Ireland from private equity , property companies , high net worth individuals and institutional investors .
Whilst we are expecting a greater volume of transactional activity in 2017 , this will not translate into yield compression and we expect yields to remain stable in Northern Ireand across the next 12 months .
A trend we will see emerging in 2017 is new hotel brands entering the Northern Ireland market and we expect to see more in the coming years .
The AC Hotel at City Quays will be the first Marriott in Northern Ireland while Andras House Limited announced the rebranding of the Ramada Plaza at Shaws Bridge from December to a Crowne Plaza , again a first for Northern Ireland . CBRE on behalf of Benmore and Octopus are inviting proposals to operate a 140200 bed hotel at the redevelopment of the former Kings Hall site which is being developed into Northern Ireland ’ s first dedicated healthcare village .
We are now entering a period of political ambiguity where the commercial real estate market , particularly investment , will be more focused on core income and strong investment fundamentals . Looking ahead to 2017 , there will be several significant deals closed in the early stages of the year that had been earmarked for the final quarter of 2016 but due to ‘ Brexit uncertainty ’, were not finalised .
The year ahead is filled with uncertainties but we would hope that many investors will seek a safe haven in commercial property that will be more difficult to find in the more volatile markets .