Q1 2016 Research Report - Northern Ireland

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QUARTER ONE 20 16

Your Property. Our Business.

CON TE NTS Table of contents 03

In t r o d uct i o n

04

In v es t ment

07

N o t a b l e I nv es t ment Tran sac ti on s

07

C u r r ent l y O n T he M a rk e t

08

O f fi ce

09

N o t a b l e O ffi ce Ta k e-Up

10

Retail

12

In dus t r i a l

14

T he Tea m B ehi nd T h e Re se arc h

IN T RO DUCTIO N Qua rter 1 2016

Cerberus have been particularl y active in this period selling the 15 acre Sirocco Site

I n ve s t m e n t

t r a n s a c t io n s

and

Cerberus

s e llin g o u t t h e ir lo a n bo o k h a ve dr iven t h e m a r ke t in t h e f ir s t Qu a r t e r o f 2016.

C e r be r u s h a ve be e n pa r t ic u la r ly a c t i v e in this period agreeing the 15 acre Sirocco Site opposite the Waterfront hall, the Castlebawn de ve lo pm e n t s it e in Ne wt o w n a r ds , the long awaited Royal Exchange development s it e in B e lf a s t c it y C e n t r e a n d a n um b e r o f s ign if ic a n t r e s ide n t ia l s it e s in N o r t h Do w n a n d L o n do n de r r y.

3

I NV E S T M E N T Q1 2016

Brexit Looms L is n e y’ s Q4 u pda t e r e po r t e d a n o pt imi s t i c o u t lo o k f o r t h e NI in ve s t m e n t m a r k e t i n 2016 wit h s u s t a in e d t r a n s a c t io n vo l u m e s dr ive n by in c r e a s in g in ve s t o r s e n t i m e n t

S TR ON G TRANSAC TION VOL UM E S

a n d t h is h a s c o m e t o f r u it io n in t h e f i r s t Qu a r t e r o f 2016.

A

n u m be r

of

s ign if ic a n t

transactions

h a ve le d t o in ve s t m e n t vo lu m e s r e a c h i n g

S U STAI N ED DEMAND

£ 120m , w it h a f u r t h e r £ 140m c u r r e n t l y on t h e m a r ke t in c lu din g C it i Gr o u p’ s B el f a s t HQ in Ga t e wa y Of f ic e s , Da m o lly Re t a i l

B RE XI T MAY STALL Q 2

P a r k a n d t h e B r it is h L a n d Po r t f o lio , ma d e

I N VE ST M ENT ACTIV ITY

P a r k a n d Te s c o C r a iga vo n .

u p o f L is n a ge lvin S C , R ive r s ide Re t a i l

The most significant new entrant to our market has been Tristan Capital

D E C L A N F LYN N , MD , L I S NE Y N I Declan Flynn joined Lisney i n 1 9 9 2 a n d w a s a p p o i n t e d Ma na gin g Dir e ct o r in 2002.

He is a Member of the RICS a n d ha s o ve r 20 ye a rs c o m m e r ci al pr o per t y e x pe r ie n c e.

F o llo wing his a ppo int m ent a s Man a ging Dir e ct o r h e e x pa nded t h e bu s ines s mo s t n o t a bly in t he a r ea o f a s s et m a na ge m e n t a c r o s s the U K. De c la n is in vo lve d in a l l aspects of the business f o c u s in g pr im a r ily o n bu s in e s s de ve lo pm e n t .

5

I NV E S T M E N T Q1 2016 A l th ou gh Q1 inv est ment v o lumes ha ve

A s a c o n s e qu e n c e o f t h e o n go in g

r em ai n e d str ong , we exp ect t he numbe r

e c o n o m ic u n c e r t a in t y, t h e I n t e r n a t i o n a l

of i n ve stm e n t t ransact io ns t o d eclin e in

Mo n e t a r y F u n d h a s c u t it s f o r e c a s t f o r

Q2 be f or e r eco v ering t o ward s t he e n d

U K gr o wt h t h is ye a r t o 1. 9% , f r o m t h e

of th e ye ar .

2. 2% it f o r e c a s t pr e vio u s ly.

Th e f oc u s f o r t he next few mo nt hs will

I n a s im ila r in s t a n c e , t h e I MF ’ s f o r e c a s t

be on “B REXIT ” and t he EU referen du m

f o r glo ba l gr o w t h w a s c u t t o 3. 2% f r o m

a nd we e x pect t hat mo st inv est o rs will

3. 4% . T h is s u gge s t s t h a t a B r e x it co u l d

tak e stoc k and await t he o ut co me o f

h a ve s e ve r e im plic a t io n s n o t o n ly

both vote s and lo cal elect io ns b e f o r e

r e gio n a lly, bu t a ls o o n a glo ba l s c a l e .

m ak i n g f u r th er inv est ment d ecisio ns .

On a m o r e po s it ive n o t e , U K in f la t ion h i t Research from Oxford Economics indicates

it s h igh e s t r a t e in 15 m o n t h s in M a r c h ,

th at th e N I e co no my may b e mo re

wit h t h e C o n s u m e r P r ic e I n de x r is in g b y

vu l n e r abl e t o t he t y p e o f st ruc t u r a l

0. 5% a n d c o r e in f la t io n t o 1. 5% .

c h an ge s wh i ch a UK exit fro m t he EU w ou l d e n c omp ass, co mp ared t o t he r e s t

W it h t h is in m in d, a pr e f e r a ble o u t c o m e

of th e U K an d it remains t o b e seen w h a t

t o t h e E U R e f e r e n du m bu o ye d b y a

i m pac t th is will have on levels of Foreign

s t r e n gt h e n in g U K m a r ke t m a y h a ve s o m e

Direct Investment.

po s it ive c o n n o t a t io n s f o r No r t h e r n I r e la n d m o vin g f o r w a r d.

IMF FORECAST FOR UK GROWTH

IMF FORECAST FOR GLOBAL GROWTH

1.9%

3.2%

2016

2016

C u t f r om p rev io usly fo recast

C u t f r o m pr e vio u s ly f o r e c a s t

f ig ure o f 2.2%

f igu r e o f 3. 4%

NOTA B L E IN V E STME NT TR ANSAC T IO N S Q1 2016 INCOME

SECTOR

£M

NIY/£PSF*

Bloomfield Shopping Centre

Shopping Centre

54.15

7.66%

Ellandi & Tristan Capital

The Outlet & Junction One

Open Retail Park

32.0

9.0%

The Lotus Group With

PURCHASER

Tristan Capital Capital House.

Office

11.0

8.1%

Melcorpo

Oxford House & Gloucester House

Office

7.75

9.5%

Wirefox

River House

Office

7.0

£80 PSF

Mercer Real Estate

Donegall Square North

Office

5.95

£218 PSF

Private Investor

*Where NIY is unavailable for vacant property £PSF has been provided.

CUR REN T L Y O N THE MA R KE T Q1 2016 ASKING PRICE £M

NIY

Part Open Retail Park

33.5

6.89%

Agreed

Gateway Offices

Office

29.0

6.5%

Under Offer

Lisnagelvin Shopping Centre

Shopping Centre

17.2

6.9%

Under Offer

Downe Retail Park

Open Retail Park

17.0

6.75%

Available

Riverside Shopping Centre

Shopping Centre

14.32

6.78%

Available

Shaftesbury Square & Bow Street

Office/High Street

9.1

5.8%

Sale Agreed

PROPERTY

SECTOR

Damolly Retail Park

STATUS

7

O F F I CE Q1 2016 T h e t o n e o f t h e NI o f f ic e m a r ke t in 2 0 1 5 w a s r e s t r ic t e d s u pply o f Gr a de A s t o c k resulting in an inability to service demand a n d t h is h a s be e n c o m po u n de d f ur t h e r in t h e f ir s t Qu a r t e r o f 2016.

Take up has reached c.160,000 sq ft in Q1 2016 Ta ke u p o f o f f ic e s pa c e r e a c h e d c i r c a 160, 00s q f t . in Q1, t h e m a jo r it y o f w h i c h w a s m a de u p o f r e f u r bis h e d e x i s t i n g

FU R THE R D E C R E AS E IN S U PP L Y SU S TA I NE D D E MA ND STR O NG RE D E VE L O PME NT P I P E L I NE

8

N OTA B L E O F F ICE TA KE -UP Q1 2016 OCCUPIER

SIZE (SQ FT)

LOCATION

Liberty IT

26,000

Adelaide Exchange, Adelaide Street, Belfast

DSD

22,727

Cleaver House, Donegall Square North, Belfast

Belfast Telegraph

17,506

Clarendon Dock, Belfast

Navi Net

15,500

Northern Ireland Science Park, Belfast

NBC Universal T/A BRS Golf

10,173

City Quays, Belfast

NIE

10,000

Old Channel Road, Belfast

This will put further pressure on rents which have been rising s pac e , r ath er t han new b uild s and in t h e

A s a r e s u lt o f t h e la c k o f s u pply w e are

a bse n c e of new d ev elo p ment s co m in g t o

also seeing more landlord friendly l e a s e

the m ar k e t, t he g ap b et ween d emand a n d

terms with incentive packages lessening

s u ppl y wi l l und o ub t ed ly leng t hen.

a n d t h e ga p be t we e n h e a dlin e a nd n e t e f f e c t ive r e n t s t igh t e n in g.

We are aware of a number of active requirements wh i c h th e current sup p ly canno t f u lf il,

A lt h o u gh c u r r e n t s u pply is lim it e d , t h e

notabl y th at o f HM R C which is se e kin g

outlook for the medium term is relatively

10 0 ,0 0 0 sq ft . o f G rad e A sp ace.

po s it ive wit h de ve lo pe r s f o c u s s ing o n r e de ve lo pm e n t /r e f u r bis h m e n t pr oj e c t s

T h i s wi l l put furt her p ressure o n r e n t s

in a n a t t e m pt t o de live r m u c h n e e d e d

wh i c h h ave b een st ead ily rising s in c e

n e w s pa c e .

20 1 4 , a n otab le examp le o f where r e n t s have gott to is t he Kilmo na reg ear o f t h e

K ilm o n a H o ldin gs a n d Mc A le e r & R u s h e

Allstate lease in Lanyon place at a headline

a r e s e t t o be a c t ive in t h is s pa c e w i t h

fi gu r e of ÂŁ2 0 p er sq ft .

pla n n in g pe r m is s io n a pplie d f o r o n a n u m be r o f c it y C e n t r e S it e s .

9

RETA IL Q1 2016

De m a n d c o n t in u e s t o be s t r o n g f o r pr im e C it y C e n t r e r e t a il pit c h e s a s

PR I M E CITY C ENTRE PE R FO RMING STRONG L Y

e vide n c e d r e c e n t ly by L if e s t yle Sp o r t s le a s in g c . 8, 000 s q f t . o f s pa ce i n Vic t o r ia S qu a r e S C wh ic h wa s pr e vio u s ly o c c u pie d by B a n k F a s h i o n .

VACAN CY RATES D E CL IN ING F U RTHER

Z ON E A RENTS TRE N DING U PWARDS TOWAR DS £150 PSF

Prime rents on Donegall Place are trending up towards £150 psf We a r e a ls o a wa r e o f a n u m be r o f o t h e r o c c u pie r s wit h e it h e r a c t iv e r e qu ir e m e n t s o r de a ls c u r r e n t ly i n le ga ls .

10

With vacancy rates declining, we expect pr im e r e n ts to co nt inue t rend ing u pwar ds an d Zo ne A t o reach ÂŁ 150 pe r sq f t on D o neg al Place.

Th is i n tu r n m ay hav e a p o sit iv e imp act on se c on dar y lo cat io ns as ret ailers lo o k towar ds the p erip hery o f t he Cit y C en tr e i n se ar ch o f suit ab le sp ace.

A s a r e su l t of Trist an Cap it al’s recent

Mo vin g f o r w a r d we e x pe c t pr im e lo c a t i o n s

s pe n di n g spr e e and t heir act iv e asset

t o c a r r y o n pe r f o r m in g s t r o n gly w it h

m a nage m e n t we are aware o f a numb er

s e c o n da r y pit c h e s be n e f it t in g a s a re s u l t

of o n goi n g de als wit hin t heir schemes

a n d r e gio n a l t o w n s t o c o n t in u e t h e ir s l o w

to UK retailers

r e viva l.

11

I ND U S T R IA L Q1 2016

L I MI TE D S U PP L Y S U S TA I NE D D E MA N D U PWA R D S P R E S S U RE O N R E NTS TOWA R D S F E AS I B L E D E VE L O P ME N T L E VE L S Lo w le ve ls o f t r a n s a c t io n a l a c t ivit y in 2015 ha v e continued into Q1 of 2016 and this is being driven on the supply side by the lack of availability s pa c e , pa r t ic u la r ly o ve r 50, 000s q f t O n t h e de m a n d s ide lo w o il a n d c o m m o dit y p r ic e s a r e c a u s in g a we a kn e s s in de m a n d f r o m ma n u f a c t u r e r s .

Th e n e t r e s u lt o f bo t h m e a n s ve r y f e w tr a n s a c t io n s o f n o t e c o m ple t in g in t h e f ir s t Q u a r t e r o f 2016

Low oil and commodity prices are causing a weakness in demand Wit h we a k de m a n d c u r r e n t ly o u t s t r ippin g lim i t e d supply, many operators are undertaking design and build projects in order to meet their requirements.

12

Th i s i s e vi denced b y aero sp ace manufacturer RLC expanding its operation to th e L an g fo rd Lo d g e sit e in Crum lin , a ÂŁ3 5 m pr o ject which is b eing b ac k by I n ve st N I to t he t une o f ÂŁ 6.5m.

I n addi ti on t o R LC and d esp it e re c e n t developments with firms such as Bombardier, there is a strong appetite from companies ope r ati n g i n t he aero sp ace ind ust r y f o r good qu al i ty sp ace and we exp ec t t h is tr e n d to c ont inue.

I n t h e m e diu m t o lo n g t e r m , w e e xp e c t pr e s s u r e o n r e n t a l va lu e s t o c o nt i n u e

In the short term, the trend of decreasing

pushing them towards viable speculative

avai l abi l i ty i s likely t o co nt inue wit h f e w

de ve lo pm e n t le ve ls o f ÂŁ 5 pe r s q f t .

oppor tu n i ti es b eco ming av ailab le.

m a kin g f in a n c e m o r e r e a dily a va ilab l e .

THE TEAM Behind the research

14

D E C L A N FL YN N

N I CKY F INNIESTON

ST EPHEN C HAMB E RS

M a nag i n g

Director

Associate Dir ector

Director

(Retail & Investment)

(Investment & Finance)

A ND R E W GAWL E Y

AOIF E B RENNAN

TANYA DUF F Y

A s s o ci a t e D i recto r

D i v isional Dir ector

Property Research e r

(Agency)

(Research Division)

(Research Division)

Your Property.

Our Business.

LISNEY NORTHERN IRELAND 1st Floor Montgomery House 29-33 Montgomery Street, Belfast, BT1 4NX 028 9050 1501 info@lisney-belfast.com

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