Q2 2016 Research Report - Northern Ireland

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QUARTER TWO 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 Quarter 2 2016

See EU Later...

Whether

. . .was on e of t he many t he t ruly red- t o p

I t e s s e n t ia lly s t a lls de c is io n m a ki n g a n d

w or th y h e ad lines sp lashed acro s s t h e

c r e a t e s a n e n vir o n m e n t o f c o n s o l i d a t i o n

pape r s on Ju ne 24t h 2016.

r a t h e r t h a n in ve s t m e n t a n d e x pa n s i o n .

Th e opi n i on p o lls sho wed a narro w le a d

B u t , in t h e s h o r t t e r m , t h e s t a t u s q u o

f or r e m ai n i n t he run up t o t he ele c t io n

r e m a in s . Da vid C a m e r o n w ill s t e p d o w n

a nd m an y of us t ho ug ht t he “lea p in t o

a s P r im e Min is t e r a h e a d o f t h e To r y

th e u n k n own” wo uld b e t o o much f o r t h e

pa r t y c o n f e r e n c e in Oc t o be r a n d h e n c e

u n de c i de d and R emain wo uld p rev a il.

t h e Go ve r n m e n t w o n ’ t t r igge r “A r t i c l e

it ’ s

the

s t o c k,

pr o per t y

or

c u r r e n c y m a r ke t s , t h e y h a t e u n c e r t a i n t y.

50” ( t h e m e c h a n is m t h a t a llo ws f o r a C om m e n tators, pol i ti c i an s ou tc om e

will is

eco no mist s fo recast ,

effect iv ely

b ut

and

m e m be r s t a t e t o e x it t h e E U ) u n t i l t h e

t h is

n e w P M is n a m e d.

unp reced e n t e d

- an d th at i s t he crux o f t he issue.

(Continued on page 5)

3

I NV E S T M E N T Q2 2016

The People Have Spoken Strong

in ve s t m e n t

vo lu m e s

in

the

f ir s t Qu a r t e r o f t h e ye a r w e r e m e t b y c a u t io u s o pt im is m w it h t h e im pe n din g E U R e f e r e n du m o n t h e h o r iz o n .

I NVE STOR DEC ISIONS D EL AY E D

A s a n t ic ipa t e d, m a n y in ve s t o r s o pt ed t o de la y de c is io n m a kin g o n t h e a s s u m p t i o n that June 23rd would disperse Brexit driven u n c e r t a in t y a n d br in g f u r t h e r c la r it y t o t h e

U NCE R TAINTY REIGNS

e c o n o m ic la n ds c a pe .

This in turn led to a decline in investment

D ECL I N E D TRANSAC TION R AT E S PRE-BREXIT

t r a n s a c t io n s in Q2, r e a c h in g o n ly £ 13 . 5 m , with a further c. £49m on the market including Downe Retail Park, Lisnagelvin Shopping Centre and the Tower Centre in Ballymena.

Fou r gr e ate r Belfast Iceland Inv est m e n t s , let on c o-te rminus leases wit h 9 ye a r s u n e x pi r e d h av e also recent ly co me t o m ar k e t.

We h ave al so seen sev eral sub £ 1m inve stm e n ts

t ransact ,

which

is

not

u n su r pr i si n g as hig h net wo rt h’s s e a r c h

See EU Later . . . ( Continued from page 3)

f or vi abl e i nv est ment o p t io ns fo r t h e ir pe n si on s i n t he mid st o f a hist o rica lly lo w inte r e st r ate env iro nment .

n e go t ia t io n a n d pr a c t ic a l i t i e s

I n th e wak e o f t he v o t e t o leav e , t h e m ar k e t

h as

exp erienced

standstill with uncertainty

A n d e ve n wh e n t r igge re d , t h e

a

b it

of

a

stalling decision

m ak i n g.

o f a n e x it will t a ke a r o u n d t w o ye a r s t o wo r k t hr o u g h , m e a n in g t h a t o u r e x it i s f a r f r o m im m e dia t e .

A s s u c h a t t h is e a r ly s t a g e i t is im po s s ible t o pr e d i c t o u r

HOW T HE VOTES STOO D

future

a r r a n ge m e n t s

on

t r a din g wit h t h e EU .

REMAIN

LEAVE

W h a t e ve r t h e o u t c o m e , w e a r e like ly t o e x pe r ien c e a bit o f a s t a n ds t ill u n t i l t h o s e in ve s t in g s e e m o r e c e r t a i n t y a r o u n d t h e f u t u r e bus i n e s s la n ds c a pe .

48.1%

51.9% W h a t e ve r

BRITAIN VOTES LEAVE

that

la n d s c a p e

lo o ks like , we n e e d a c l e a r e r u n de r s t a n din g qu ic kly,

w it h

of

it the

-

and hope

our

be in g t h a t t h o s e in c h a r g e

m ar k e t r e m ai n st ro ng , T he sup p ly /d em a n d

w h o h a ve be e n s o m e w h a t t a k-

dyn am i c s

e n by s u r pr is e a c t pro m p t l y

Th at

sai d

t he in

c om m e r c i al

o ur

fund ament als t wo

p ro p ert y

mo st

in

p ro m in e n t

sect o rs

( o f f ic e

and

de c is ive ly

throughout

a nd r e tai l ) i s g o o d wit h a st ro ng “s t o r y”

w h a t w ill be a n u n c e r t a i n

a rou n d f u tu r e rent al g ro wt h in sust a in a ble

Qu a r t e r 3.

lo c ati on s.

5

I NV E S T M E N T Q2 2016

T h e r e s ide n t ia l m a r ke t is pe r f o r m i n g we ll a n d de s pit e a r e du c t io n in t h e h o u s e pr ic e in de x in Q1 t h e t r a je c t o r y of the market remains positive, especially c o n s ide r in g t h e f u n da m e n t a ls o f o u r lo c a l r e s ide n t ia l m a r ke t in r e la t io n t o de m a n d, a n d pr ic e s r e la t ive t o t h e i r pe a k in 2007.

A pa r t m e n t

s a le s

in

pa r t ic u la r

are

e n c o u r a gin g, u p 10. 2% o n Q2 20 1 5 a n d a s a r e s u lt t h e r e a r e a n u m be r o f n e w de ve lo pm e n t s m a kin g t h e ir w a y t h r o u gh pla n n in g.

A n o t h e r po s it ive f o r o u r m a r ke t is th e number of cranes on the skyline building s t u de n t a c c o m m o da t io n a n d h o t e ls .

Mc A le e r a n d R u s h e c o n t in u e t o m a k e gr e a t s t r ide s in t h is r e ga r d wit h 1, 2 0 0 s t u de n t be dr o o m s pla n n e d f o r s it e s a t Mc lin t o c k S t r e e t a n d C o lle ge A ve nu e wh ile B e a n n c h o r ’ s “ B u llit t � is s e t t o o pe n in t h e a u t u m n a n d will f o r m pa r t o f t h e ple t h o r a o f h o t e l de ve lo pm e n t s t o be de live r e d in t h e c it y c e n t r e .

While

developers

are

understandably

t a kin g s t o c k f o llo w in g r e c e n t e ve n t s , there

is

no

in dic a t io n

that

the

a s pir a t io n s o r pla n s h a ve c h a n ge d.

P la n n in g a pplic a t io n s c o n t in u e t o m a k e t h e ir

way

t h r o u gh

the

pr o c e s s

and

de ve lo pe r s r e m a in c o m m it t e d t o goi n g t o s it e .

6

CU R RE N T L Y O N THE MA R KE T Q2 2016 ASKING PRICE £M

NIY

Open Retail Park

17.0

6.76%

Agreed

Lisnagelvin Shopping Centre

Shopping Centre

17.2

6.9%

Agreed

Tower Centre

Shopping Centre

6.0

10.0%

Available

Foyle Chambers

Office

3.04

7.0%

Available

Iceland Newtownards Road

Retail

1.59

6.25%

Available

Iceland Antrim Road

Retail

1.46

6.25%

Available

Iceland Finaghy Road

Retail

1.275

6.25%

Available

Iceland Shankill Road

Retail

1.135

6.25%

Available

PROPERTY

SECTOR

Downe Retail Park

STATUS

NOTA B LE IN V E STME NT TR ANSAC T IO N S Q2 2016 PROPERTY

SECTOR

£M

NIY

PURCHASER

Avenue House

Office

6.55

10.11%

UK Fund

Lesley Retail Park

Open Retail Park

5

8.38%

Sports Direct

Carleton House

Office

1.975

4.01%

Private Investor *Off market transactions are not included

7

O F F I CE

G R A D E A D E MA ND R E MA I NS S TR O NG

Q2 2016

S U PP L Y L I MI TE D

Th e N I of f i ce market has b uilt o n it s posi ti ve start t o t he y ear in Q 1 a n d e n c ou r agi n g

t ake-up

fig ures

for

Q2

D E VE L O PME NT

s u gge st th at d emand fo r G rad e A s t o c k r em ai n s str ong .

P I PE L I NE U NA B L E TO

We ar e aware o f c. 75,000 sq f t o f

ME E T D E MA ND

s pac e be i n g t aken up , b ring ing t he t o t a l f or th e ye ar to d at e (H1) t o 235,000 s q f t ,

e x pe c t t h is t o c o n t in u e in t h e s h o r t t e r m

which

wit h t h e c u r r e n t de ve lo pm e n t pip e l i n e

is

sig nificant ly

hig her

than

th e sam e perio d (H2) in 2015 w h e n

u n a ble t o m e e t de m a n d.

8 7,5 0 0 sq f t o f act iv it y was reco rd e d.

T h is will pu t f u r t h e r u pwa r ds pr e s s u r e o n r e n t s a n d w ill c o n t in u e t o do s o u n t i l

H1 O FF ICE TAKE U P

t h e y r e a c h a le ve l a t wh ic h de ve lo p m e n t be c o m e s via ble .

235,000 SQ FT

A t t h is po in t it is dif f ic u lt t o s e e h o w o f f ic e de ve lo pm e n t w ill c o m e f o r w a r d u n t il u n de r lyin g r e n t s r e a c h ÂŁ 2 0 p s f plu s a n d wh ils t t h e r e a r e s ign s o f t h is ,

lim it e d

e vide n c e

is

a va i l a b l e

a n d w e n e e d t o s e e la r ge r t r a n s a c t i o n s h a ppe n in g.

87,500 SQ FT

No t a ble

r e qu ir e m e n t s

in c lu de

the

B B C wh o a r e s e e kin g 120, 000 s q f t o f Gr a de A s pa c e a n d De lo it t e w h o

2015

2016

r e qu ir e 75, 000 s q f t f o llo win g t h e i r r e c e n t a n n o u n c e m e n t t o e x pa n d t h e i r o pe r a t io n s in No r t h e r n I r e la n d.

A l th ou gh Q2 has seeming ly exp erie n c e d a r e du c e d l e v el o f act iv it y o n Q 1, t h is is

In

the

a bs e n c e

ve r y m u c h a funct io n o f limit ed s u pply

A

stock

r ath e r th an a lack o f d emand and we

are

w it h in

of the

c o n c e n t r a t in g

s u it a ble c it y, t h e ir

Grade Del o i t t e

attention

it is difficult to see how development will come foward until underlying office rents reach £20psf plus. on on e de velo p ment which has ye t t o

R h in o

br e ak gr ou n d , namely Erskine Ho us e o n

L e s le y B u ildin gs , a m ix e d u s e r e t a il of f i c e

C h i c h e ste r St reet and t wo d ev elo pm e n t s

scheme

which

p la n n in g

L a ga n vie w Ho u s e h a s ju s t be e n br o u g h t

a p pr oval i n t hat o f S t arg ime’s p ro po s e d

t o t h e m a r ke t a n d t h is f o r m e r B a n k o f

4

I r e la n d

h ave

Qu e e n s

y et

to

S q uare

receiv e which

is

p la n n in g

8 0,0 0 0 sq f t o n t he fo rmer F irst Trus t B a n k

h a ve on

r e c e n t ly

pu r c h a s e d

F o u n t a in

pr e m is e s

Street,

the while

c o u ld

pr ov i d e

a bo ve

u pc o m i n g

11, 000 s q f t o f s pa c e .

s i te an d ph ase 2 o f M cAleer and R u s h e ’ s B e df or d Square which has t he p ot e n t ia l

In

a ddit io n

to of f e r 2 2 5 ,000 sq ft o f sp ace.

pr o je c t s

to

the

from

K ilm o n a

Ho ld i n g s ,

Mc A le e r & R u s h e a n d S t a r gim e a r e I n th e sh or t term, seco nd ary refurb is h m e n t

s e t t o pr o c e e d o n r e c e ipt o f pla n n i n g

oppor tu n i ti e s hav e t he p o t ent ial t o br idge

c o n s e n t s wh ile Or by I n ve s t m e n t s l o o k

th e gap wh i le t he d ev elo p ment p i pe lin e

s e t t o br e a k gr o u n d s o o n a t E r s k i n e

gath e r s m om ent um.

H o u s e o n C h ic h e s t e r S t r e e t o n Qu e e n s S qu a r e .

N OTA B L E O F F ICE TA KE -UP Q2 2016 OCCUPIER

SIZE (SQ FT)

LOCATION

Citi

16,273

Donegall Square North, Belfast

EY

11,000

Bedford House, Belfast

ARUP

9,000

Bedford House, Belfast

Shopkeep.com

7,800

40 Linenhall Street, Belfast

R E TA IL Q2 2016 Th e r e tai l sect o r co nt inues t o e n jo y a pe r io d o f su stai n e d gro wt h and falling v ac a n c y r a t e s c o u ple d wi th i n c r e ased d emand fo r p rime c it y c e n t r e pit c h e s i s c r e ati n g furt her up ward s p ressu r e in r e n t s .

Re tai l e r s taking sp ace in cit y c e n t r e lo c a t io n s in c lu de Ec c o S h o e s w h o no w oc c u py 1 ,500sq ft in Vict o ria S q u a r e S h o ppin g C e n t r e , P a n do r a ’ s 1, 664 s q f t m e ga stor e at Co rnmarket and G re ggs la t e s t ve n t u r e o n R o ya l A ve n u e .

NOTA B L E RE TA IL T R ANSAC T IO NS

I r e la n d’ s f ir s t dr ive t h r o u gh c o f f ee s h o p .

T h e S e a t t le ba s e d f ir m a r e a imi n g t o c o m m e n c e c o n s t r u c t io n in Oc t o b e r a n d c o u ld o pe n be f o r e t h e e n d o f t h e y e a r .

Q2 2016 RETAILER

LOCATION

Specsavers

Victoria Square, Belfast

STA Travel

Victoria Square, Belfast

Ecco

Victoria Square, Belfast

Moss Bros

Castle Lane, Belfast

Patisserie Valerie

Donegal Square West, Belfast

Pandora

Cornmarket, Belfast

Greggs

Royal Avenue, Belfast

Bon Marche

Abbeycentre, Newtownabbey

Jack Jones

Abbeycentre, Newtownabbey

Warren James

Richmond Centre, Derry

Specsavers

Bloomfield Centre, Bangor

E n c ou r agi n gly, we are also s e e in g s i gn i f i c an t transact io ns in o ut o f t o wn lo c ati on s wit h Ho me Barg ains at H ol ywood Exchang e and G o O u t do o r s & Sm yth ’s Toy s at Valley R et ail Park.

Th e stor y i s also p o sit iv e fo r o ut of t o w n s h oppi n g c e nt re schemes wit h co n t in u e d inve stm e n t s et t o imp ro v e t he o fferin g t o c on su m e r s.

Th e Ki l l u l tag h o wned Co nns w a t e r Sh oppi n g Cent re in east Belfas t h a s r ec e n tl y h ad p lanning g rant ed fo r a n e x pan de d 2 3,000sq ft Lid l st o re wh ile Star bu c k s are also g earing u p t o e n te r th e sc heme b y p ro v id ing No r t h e r n

De s pit e the e c o n o m ic uncertainty dr ive n by J u n e ’ s B r e x it vo t e , d e m a n d f r o m r e t a il o c c u pie r s r e m a in s s t r o n g a n d w h ile c o n s u m e r c o n f ide n c e m a y h a v e f a lt e r e d, it h a s n o t dis a ppe a r e d.

W it h a de f ic ie n c y in s u pply we e x p e c t c o n t in u e d r e n t a l gr o wt h w it h in t h is s e c t o r m o vin g f o r wa r d a s r e t a ile r s c o n ti n u e t o vie f o r pr im e pit c h e s o n h igh s t r e et s a n d wit h in t h e po pu la r s c h e m e s .

S US TA I N E D G R OW T H FA L LI N G VACA N C Y UPWARD RENTAL PRESSURES 11

I ND U S T R IA L Q2 2016

Q2 h a s e x pe r ie n c e d a s ign if ic a n t in c r e a s e in u pt a ke o n Q1 w it h s t r o n g de m a nd f o r s pa c e in B e lf a s t a n d m id- U ls t e r .

S TR ON G TRANSAC TION

T h e r e h a ve be e n a n u m be r o f n ot a b l e t r a n s a c t io n s in vo lvin g la r ge r u n it s o v e r

VOL UM E S

50, 000 s q f t wh ic h we did n o t s e e a t a l l

S U STAI N ED DEMAND

Mc Mu lla n

in Q1. f a c a de s

h a ve

le a s e d

c . 96, 000 s q f t . in Po r t a do w n f o r a s t a t e o f t h e a r t m a n u f a c t u r in g f a c ilit y w h i c h

12

B RE XI T MAY STALL Q 2

is t h r e e t im e s t h e s iz e o f t h e ir c u r r e n t

I N VE ST M ENT ACTIV ITY

t h e ir w o r kf o r c e .

pr e m is e s a n d t h is will in t u r n in c re a s e

Q2 has experienced a significant increase in uptake on Q1 with strong demand for space in Belfast and mid-Ulster.

Simi l ar i ty, e x pan si on

MJM

G ro up

pl a ns

hav e

wit h

t heir

sig nif ic a n t

Mo vin g f o r w a r d de m a n d r e m a in s h i g h f o r

p ur c h a s e

la r ge r s pa c e a n d we h o pe t o s ee m o r e

of th e f or m e r Shanklet o n Barracks milit a r y ba s e i n B al l yk elly, Co . Lo nd o nd erry wh ic h w ill be u se d f or fit t ing o ut p riv at e jet s .

Moving forward,

I n wh at i s c e r tainly a p o sit iv e mo v e fo r t h e

demand remains

indu str i al m ar ket and a sig n o f ret u r n in g c on f i de n c e ,

S lo efield

Business

Pa r k

high for larger

in

C a r ri c k f e r gu s hav e und ert aken a sp ecula t ive bu ild of 2 u n i ts which will o ffer 10,0 00 s q

space...

f t of spac e i n the aut umn, o ne o f whic h h a s n ow be e n agr e ed .

I n addi ti on , we are aware o f a num be r o f

s pe c u la t ive bu ild pr o je c t s t o a d d i n g

indu str i al i n ve s t ment s which hav e rec e n t ly

s o m e m u c h n e e de d s u pply t o w h a t h a s

be e n

be e n a n e n c o u r a gin g qu a r t e r .

agr e e d

and

exp erienced

strong

bid di n g wh i c h has b een a rarit y in t h is s e c tor of l ate .

NOTA B L E IN D U STR IA L TRANSAC T IO N S Q2 2016 OCCUPIER

LOCATION

SIZE

TYPE

Yello

Kilroot Business Park, Carrickfergus

21,000 Sq Ft

Lease

Amazon

Kilroot Business Park, Carrickfergus

28,000 Sq Ft

Lease

McMullan Facades Ltd

McMahon Industrial Estate, Portadown

96,000 Sq Ft

Lease

MJM Group

Shackelton Industrial Estate, Ballykelly

745,000* Sq Ft

Sale *Total Space

THE TEAM Behind the research

14

D E C L A N FL YN N

N I CKY F INNIESTON

DAVID MC NELLIS

M a nag i n g

Director

Director

Director

(Retail & Investment)

(Agency)

A ND R E W GAWL E Y

STE PHEN C HAMB ERS

AOIF E B RENNAN

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

A ssociate Director

Div isional Dir ector

(Agency)

(Investment & Finance)

(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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