Commercial investment activity regains momentum

The Wirefox acquisition of CastleCourt in Belfast city centre for �123m has been dominated the local commercial market
The Wirefox acquisition of CastleCourt in Belfast city centre for �123m has been dominated the local commercial market

Activity in the Northern Ireland commercial property investment market has regained momentum in Q3, recording the second highest quarterly performance in recent years, according to a report today.

The Investment Transactions Northern Ireland bulletin from Lambert Smith Hampton says that at £194.4m, the volume of investment was twelve times higher than in the second quarter of the year.

Retail transactions, valued at £172.8m, accounted for 89 per cent of activity in the quarter. While dominated by Wirefox’s £123m purchase of CastleCourt Shopping Centre, a further £50m of retail transactions were also recorded, including the £27.7m Tesco Extra in Newry, £11.1m Valley Retail Park in Newtownabbey and the £9.2m Great Northern Retail Park in Omagh.

Accounting for 8% of total volume, the alternative sector – which includes hotels, car parks, leisure, care homes and medical facilities - recorded more activity in Q3 than the traditional core sectors of office, industrial and mixed-use.

Mixed-use activity was attributed to a single deal, a portfolio of care homes in Armagh and Jordanstown purchased by LXi REIT for £14.9m.

While office investments represented only 3% of Q3 volume, at £5.3m, activity was improved compared with the previous 2017 quarters.

“In the first half of this year we did record a drop in activity levels, however in Q2 there were positive signs that a stronger result was in the pipeline,” said Neil McShane, director in the firm’s capital markets division.

“The outlook for the final quarter of 2017 is positive for the commercial property market.

“The main barrier to activity in the first half of 2017 was the mismatch between healthy investor demand and the scarcity of larger value assets available. The pick-up in Q3 and forecast for Q4 is the result of an increase in supply of good quality, larger value assets.

“These assets have helped to relieve investor frustrations, although they have been predominantly in the retail sector. A fluid supply of this asset type is required to maintain activity.”

Investment volume for the year to date is £222.1m and it is expected to reach £350m by the end of the year. Compared with 2016, total investment activity will be approximately 25 per cent higher.

“During recent months, there has been a trend of competitive bidding for smaller lots with attractive tenants,” Mr McShane added.

“For example, the Starbucks and Boojum properties on Botanic Avenue, the Caffè Nero in Newcastle and the Greggs properties in Bangor and Lisburn have attracted significant interest amongst local investors. In the coming months, a number of similar properties will come to market, and again we expect they will generate high levels of interest.

“It is positive to see that the health of the Northern Irish investment market is showing signs of continued resilience.”

The report follows similar data late last week from commercial agency Savills, indicating a significant rise in the uptake of office space in Belfast

Key deals included the letting of 11,564 sq. ft. to broadcaster, UTV at the City Quays 2 office development while Newry-based financial firm First Derivatives agreed a deal to become the anchor tenant at the Weaving Works building, taking 25,034 sq ft.

“The occupier market in Belfast remains healthy post Brexit, with office take up in 2016 35% ahead of the 5 year average,” said Simon McEvoy of Savills NI adding that 2017 is expected to set new records and exceed 2016’s take-up.

“Behind this there is also a very healthy 750,000 sq ft of demand, predominately for Grade A offices, however with less than 200,000 sq ft of current Grade A availability it is time to start the supply of new developments to meet this demand.”