Commercial property sector faces opportunities and challenges in 2016

The need for more grade A office space and industrial capacity are two of key requirements in Northern Ireland during 2016 according to the latest analysis from commercial agents Lisney.

The findings come with the publication of the 2015 Northern Ireland Commercial Property Report, one of the most comprehensive studies of the commercial property market in the province across the investment, retail, office and industrial sectors.

It reveals that the retail sector is strengthening, with prime retailing locations throughout the province having enjoyed their first fall in vacancy rates last year since 2011.

However, the findings for the office and industrial markets paints a less positive picture.

Looking ahead, Lisney predicts that the Northern Ireland commercial property market will sustain its resurgence during 2016 and be strengthened further by ever-improving consumer confidence.

The number of investment transactions doubled in 2015 showing a move away from large portfolio sales as the market normalised.

The volume of transactions hit £420m at the end of 2015

A further £100m of transactions in legals at end 2015 and £70m of property on the market indicates an active start to 2016.

Whilst retail vacancy rates still lag behind the rest of the UK, prime town centre and out of town retail locations returned the lowest vacancy levels recorded since 2011.

Prime Retail vacancy rates fell by 2.5 per cent, from 17.1 per cent in 2014 to 14.6 per cent in 2015.

Two of the most prominent deals during the year were the purchases of Fairhill Shopping Centre in Ballymena by Rockspring and of Erneside Shopping Centre in Enniskillen by Ellandi with Tristan Capital, for £45.6m and £34.5m respectively.

Take up in the Grade A office market has finally stalled due to a lack of availability

Industrial availability is at an all-time low, gradually forcing an increase in rent

“Unfortunately 2015 will be remembered as the year when take up in the Northern Ireland office market stalled, largely due to a supply failure,” said Lisney Northern Ireland MD Declan Flynn.

“With a severe shortage of Grade A stock headline rents can only go up which will encourage new office developments.

“In the absence of this Grade A office stock, 2016 will see investors and developers continue to chase older vacant buildings with a view to refurbishing the office space or potentially changing the use - for example, office to hotel, or office to student housing.This will remain the case until rents reach a viable development level.

“The industrial sector remains challenging, with a shortage of good quality accommodation and viable developments some way off. This is presenting a problem for new entrants looking for suitable premises available for immediate occupation.”

Looking ahead, Mr Flynn added: “We have already seen significant activity within the local investment markets this year and I expect Northern Ireland will remain firmly on the radars of local and national investors throughout 2016.

“The reduction of Corporation Tax in 2018 has the potential to fuel further growth in our market, and certainly ticks important boxes in meeting the needs of global employers.

“It takes Northern Ireland’s appeal to international investors to a new level and is an important opportunity that must be grasped with both hands.”