Q3 2016 Research Report - Northern Ireland

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QUARTER THREE 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

Q 3 I nv es t ment Tr a nsac ti on s

08

O f fi ce

10

Q 3 O ffi ce Ta k e U p

11

Retail

10

Q 3 R et a i l Tr a ns a ct i on s

13

In dus t r i a l

14

Q 3 I nd us t r i a l Tr a ns ac ti on s T he Tea m B ehi nd T h e Re se arc h

IN T RO DUCTIO N Quarter 3 2016

Fog Lifts As May Arrives P re di c ti on s

S um m e r

P a r t y a n d wit h in 48 h o u r s Mr Ca m e r o n

a b ou n de d at t he clo se o f Q uart er 2 wit h

t e n de r e d h is r e s ign a t io n m a kin g he r t h e

m an y an ti c i p at ing t he p re-Brexit pa u s e

U K ’ s s e c o n d f e m a le P r im e Min is t e r.

in

of

tr an sac tio nal

an

uncert ain

inv est ment

a c t ivit y

w ou l d pr e vail t hro ug ho ut Q uart er 3.

T h e e f f e c t o f t h is s t r o n g h a n d t a k i n g t h e po s t B r e x it t ille r w a s a n a ir o f i n i t i a l

Th e

i n i ti al

uncert aint y

the

c o n f ide n c e c o m in g ba c k t o t h e m a r k e t s

id e n ti ty of D av id Camero n’s p red ece s s o r ,

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

pr e di c te d to t ake o ffice in S ep t e m be r

Ma y’ s s o c a lle d “ s e n s ible a n d or d e r l y ”

2 01 6 , di d l i tt le t o b o lst er much n e e de d

de pa r t u r e f r o m t h e E U t h a t in vo lv e d t h e

c on f i de n c e

the

t r igge r in g o f A r t ic le 50 o f t h e L i s b o n

s tar t of Qu art er 3 g av e many cau s e f o r

Tr e a t y be in g po s t po n e d t o 2017 a t t h e

c on c e r n th at a S ummer o f d isco nt en t w a s

e a r lie s t .

and

t he

reg ard ing

climat e

at

imm i n e n t.

A u gu s t pr o ve d t o be a m o n t h o f s e t t l i n g Th e n ati on s eemed t o b reat h a s ign o f

du s t w it h bu s in e s s e s , in ve s t o r s a n d t h e

r el i e f on 1 1t h July when T heresa Ma y

n a t io n a s a wh o le t a kin g s t o c k d u r i n g

be c am e l e ader o f t he Co nserv at iv e

pa r lia m e n t s S u m m e r r e c e s s a n d. . . a s t h e (Continued on page 5)

I NV E S T M E N T Q3 2016

T R A N SAC TIONAL

Caution Reigns F o llo w in g o n f r o m t h e pr e a nd p o s t

ACT IVITY LOW

B r e x it lu ll in in ve s t m e n t a c t iv i t y t h e w h e e ls o f t h e NI m a r ke t h a ve s l o w l y

CAUT I ON PREVAILIN G

be gu n t o t u r n a n d t h e a ppe ti t e f o r h igh e r

qu a lit y

assets,

pr ic e d

to

r e f le c t o n go in g r is ks , r e m a in s s t r o n g de s pit e c o n t in u e d u n c e r t a in t y.

I M PL ICATIONS AS STERLING VALUE FALLS

I n ve s t m e n t

t r a n s a c t io n

vo lu m e s

for

Q3 we r e do w n c o n s ide r a bly f r om o u r e s t im a t e s a t t h e be gin n in g o f t h e y e a r w it h o n ly £ 45m h a vin g t r a n s a c t e d .

YIELDS

SUPPLY

DEMAND

T h e r e is a f u r t h e r £ 36m c u r r e n t ly o n t h e m a r ke t in c lu din g t h e Ma n s f o r d o w n e d S t r a ba n e S h o ppin g P a r k a n d La h a r n a R e t a il P a r k h o we ve r w e a r e e x p e c t i n g

... to se e a n u mb er o f sig nificant asset s c o m in g to th e m ar k et o r b eing re-market e d o ve r t h e com i n g m on ths.

W h i l st th e majo r t ransact io ns in Q3 w e r e a c qu i r e d by lo cal inv est o rs, t he m a r ke t in G B i s be i n g d riv en b y fo reig n inv e s t o r s wh o a r e be i n g att ract ed b y t he weak po u n d a n d p e r c e i ve d di sco unt av ailab le fo r g o o d qu a lit y a sse ts. We w o uld exp ect t o see t hes e in ve s t o r s

F og Lif ts As M ay Arrives ( Continued from page 3)

tak i n g a f r e sh lo o k at o ur market shou ld we , a s ex pe c te d, see a numb er o f g o o d q ua lit y a s s e t s com i n g to th e market in Q 1 2017.

The most notable transaction in Q3 was by the MJM Group who purchased Damolly Retail Park in Newry...

48.1% 51.9%

...as

po lit ic ia n s

after

t h e ir

reconvened

br e a k

t he

Brexit

s t o r m c lo u ds s t a r t e d t o c l e a r i n No r t h e r n I r e la n d.

A t a n gible B r e x it bo u n c e w a s r e po r t e d a lo n g t h e bor d e r d u e t o t h e lo w va lu e o f th e p o u n d lit e r a lly

dr ivin g

co n s u m e r s

No r t h in s e a r c h o f v a l u e a n d a s t h e qu a r t e r dr e w t o c l o s e t h is

u n a n t ic ipa t e d

boon

for

t h e pr o vin c e s bo r de r r e t a i l e r s m ir r o r e d t e n t a t ive pos i t i v i t y i n t h e c o m m e r c ia l pr o pe rt y m a r k e t .

T h o u gh c a u t io n s t ill p r e v a i l s , du e t o u n de r lyin g c o n c e r n s o v e r

Recent

r e search

fro m

that

S t erling

s ugge sts

O xfo rd has

E c o n o m ic s

t h e s t r e n gt h o f t h e e c o n o m y,

h is t o r ic a lly

the

return

of

t r a ns a c t i o n a l

t e r r it o r y

a c t ivit y h a s pr o vide d c o m f o r t

1996- 97,

t h a t t h e pr e a n d po s t B r e x i t l u l l

2 0 0 9 - 1 1 an d 2013-15 so wit h t his in m in d,

did n o t h e r a ld a r e pea t o f t h e

the ti m i n g co uld b e rig ht fo r a n u m be r o f

c r is is w it n e s s e d in 20 0 7 / 2 0 0 8 .

r al l i e d over

str ong ly th e

past

fro m 25

und erv alued y ears,

in

p ote n ti al e n t rant s t o o ur market .

T he

m ost

no t ab le

t ransact io n

in

Q3

wa s

b y th e MJM G ro up who p urchase d Da m o lly R e tai l Par k i n Newry fo r ÂŁ 30.72m. re f le c t in g a NIY of 7 .4 % .

5

I NV E S T M E N T Q3 2016 Th e f u n dam ent als o f inv est ing in lo c a l

r a t e s /bo n d

c om m e r c i al

ro b u s t ,

c o m m e r c ia l pr o pe r t y in ve s t m e n t w i l l

u n de r l i n e d by a g o o d o ccup at io nal s t o r y

c o n t in u e t o be ve r y a t t r a c t ive , e v e n

a cr oss

wit h t h e c u r r e n t u n c e r t a in t y.

p ro p ert y

al l

c on ti n u e s

sect o rs. to

fall

remain R et ail

while

v aca n c y

o ffice

r e m a in

high

rents

c on ti n u e to gro w o n t he b ack o f st r o n g

L o o kin g f o r w a r d we e x pe c t t o s e e

indi ge n ou s d emand and limit ed su pply

in ve s t m e n t

E ve n ou r i n d ust rial market is sho win g

2017 w it h in ve s t o r s pr o c e e din g w i t h

s i gn s of i m pro v ement wit h d ev elo pe r s

c a u t io n . I f a s s e t s a r e pr ic e d c o r re c t l y

n ow l ook i n g at b uild ing new shed s t o

we w ill u n do u bt e dly s e e s a le s vo lum e s

s ati sf y de m and .

in c r e a s in g.

I n e sse n c e whilst t he g ap b et w e e n c om m e r c i al pro p ert y y ield s and int er e s t

6

yie lds

vo lu m e s

im pr o ve

in

Q1

C UR RE N T LY O N THE MA R KE T Q2 2016 ASKING PRICE £M

NIY

STATUS

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

1.28

6.25%

Available

Iceland, Shankhill Road

Retail

1.14

6.25%

Available

Laharna Retail Park

Open Retail Park

5.78

8.0%

Available

Strabane Shopping Park

Open Retail Park

3.29

8.0%

Available

Currys/PC World Sprucefield

Retail

14.0

7.7%

Available

Waterside Tower & North Tower

Office

4.50

6.69%

Available

PROPERTY

SECTOR

Foyle Chambers

N OTA B LE IN V E STME NT T RA N SAC T IO NS Q3 2016 PROPERTY

SECTOR

£M

NIY

PURCHASER

Damolly Retail Park

Open Retail Park

30.72

7.4%

MJM Group

Tower Centre

Shopping Centre

6.5

8%

Local Investor

Lesley Buildings

Office

8.0

-

Private Investor *Off market transactions are not included

7

OFFICE Q3 2016 Th e N I of f i ce market co nt inues t o

T h e t o n e o f t h e o f f ic e m a r ke t h a s

pe r f or m we l l wit h d emand fo r G rad e A

s e e n lit t le c h a n ge in r e c e n t m o n t hs

s pac e r e m ai ning st ro ng .

w it h de m a n d c o n t in u in g t o o u t s t ri p s u pply.

Ta k e u p i n Q3 amo unt ed t o 78,000 s q f t wh i c h is up slig ht ly o n t h e

The only significant speculative office

pr e vi ou s qu art er when 75,000 sq f t

building under construction at the

w as r e c or de d and b ring s t he t o t al f o r

moment is CQ2 which will provide

th e ye ar to 3 13,000sq ft .

just over 90,000 sq ft of Grade A accommodation in Clarendon Dock.

We u n de r stand t hat t he land lo rd ha s

ligh t f o r ph a s e 2 o f B e df o r d S qu a r e .

a g r e e d te r m s o n all b ut t wo flo o r s

T h e la t t e r w ill in c lu de t h e r e f u r bis hm e n t

a nd th at th e y are achiev ing head lin e

o f t h e lis t e d W illia m Ew a r t bu ildin g a n d

r en ts of £2 0 p sf wit h v ary ing rent fre e

c o u ld de live r 215, 000s q f t o f s pa c e .

inc e n ti ve s

b eing

g iv en

to

the A lt h o u gh t h e s e de ve lo pm e n t s m a y w e l l

pr ospe c ti ve tenant s.

a lle via t e

the

s u pply

ga p

in

the

Si m i l ar l y i n the Cit y Cent re t here are a

m e diu m t e r m it is dif f ic u lt t o s e e h o w

n u m be r of tr ansact io ns which hav e n o t

de m a n d w ill be m e t in t h e s h o r t t e r m a n d

c om pl e te d as y et wit h head line ren t s

t h is will pla c e e ve n m o r e im po r t a n c e o n

of be twe e n £ 20 and £ 22p sf.

r e f u r bis h m e n t pr o je c t s .

HEADLINE R E NTS 20 12- 20 17 £23.00 £22.00 £21.00 £19.00

£20.00 £19.00 £18.00 £17.00

£15.50

£17.00

£16.00 £15.00 £14.00 £13.00

£12.50

£12.50

2012

2013

£13.00

Q3

£12.00 £11.00 2014

2015

2016

2017

On th e su ppl y sid e v ario us sp eculat ive de ve l opm e n ts co nt inue t o make t he ir w ay

th r ou gh

t he

p lanning

sy st em ,

two n otabl e schemes hav e recen t ly

STRONG DEMAND O UT S R I P P I N G S U P P LY

be e n gr an te d ap p ro v al and co uld go s om e way to meet ing t he sig nifica n t ou tstan di n g req uirement .

K il m on a

Ho ld ing s

hav e

o b t ain e d

HEADLINE RENTS REACH £20PSF

pl an n i n g pe rmissio n fo r t heir sit e o n E ast B r i dge S t reet which has t h e pote n ti al to o ffer 230,000 sq ft o f Gr ade A sp ace, and M cAleer a n d Ru sh e h ave a lso b een g iv en t he g ree n

RENTS

Y IELDS

S U PPLY

DEMAND

O F F I CE Q3 2016

OW N E R OCC U PATIO N A s r e n tal l e vels co nt inue t o

p lay c a t c h

C o n c e n t r ix a n d w ill de live r 66, 000 s q f t

u p wi th c ost s t he sup p ly o f G rade A

of

s pac e r e m ai ns co nsid erab ly hind ered.

Ma ys f ie ld L e is u r e C e n t r e wh ic h w i l l form

Th e r e su l ti n g lack o f ap p ro p riat e s pa c e

o f f ic e pa r t

s pa c e of

a

at ÂŁ 36m

the

f o rm e r

in ve s t m e n t

by t h e bu s in e s s s e r vic e s f ir m .

is l e avi n g so me larg er o ccup iers w it h n o und e r t a ke

S im ila r ly, A lls t a t e h a ve be e n gr a n t e d

th e i r own desig n and b uild p ro je c t s t o

pla n n in g pe r m is s io n a n d a r e o n s it e o n

m e e t th e i r r e q uirement s.

a n a dja c e n t s it e a n d h o pe t o pr o v i d e

c h oi c e bu t to g o it alo ne and

115, 000s q f t o f s pa c e a s t h e y m o v e C on tr ac tor s

O ’Hare

and

M cG o ve r n

t h e ir o pe r a t io n s f r o m L a n yo n P la c e.

h ave gon e to sit e o n t he inst ruct io n s o f

NOTA B L E O F F ICE TA KE -UP Q3 2016 OCCUPIER Tourism NI

10

SIZE (SQ FT) LOCATION 17,649

LOCATION Floors 10-12, Linum Chambers, Bedford Street

Regus

17,400

4th & 5th Floor, Lincoln Building, Great Victoria Street

Pearson Management Services

15,396

1st Floor, Millennium House, Great Victoria Street

Speechstorm Ltd

5,305

8th Floor, The Linenhall, 32-38 Linenhall Street

RE TA IL Q3 2016

U P WA R D PR E S S U R E O N R E NTS FA L L I NG VACA NC Y

Th e r e tai l land scap e co nt inues t o impr ove de sp it e t he Brexit v o t e wit h f al l i n g vac ancy rat es in Belfast c it y centre placing further upwards pressure on r e n ts wi th Zo ne A no w t rend ing a t ÂŁ1 2 5 psf f or prime cit y cent re p it che s .

Th e r e tai l story has b een b uo y ed furt h e r by a de val ued p o und enco urag i n g s h oppe r s f r om t he R ep ub lic t o v ent ur e n or th .

ZO NE A R E NTS TR E ND I NG AT ÂŁ125 PSF RENTS

Y IELDS

S U PPLY

DEMAND

B or de r town s in p art icular hav e seen a n u ptu r n i n f oo t fall and sp end in rece n t m on th s an d this is set t o co nt inue f o r th e sh or t te r m at least .

N e wr y, D e r r y, S t rab ane and Enniskill e n h ave al l se en increased numb ers o f s h oppe r s c o ming no rt h. Erneside Sh oppi n g C ent re in Enniskillen ha s r ec or de d i n c reased fo o t fall o f aro un d 1 0% i n Ju l y and Aug ust co mp ared t o th e sam e m o nt hs last y ear, wit h 80% of r e tai l e r s reco rd ing sales g ro wt h o f be twe e n 4 % - 40%.

11

N OTA B L E RE TA IL TR A NSACTIO NS Q3 2016

12

RETAILER

LOCATION

Stradivarius

Castle Lane, Belfast

Greggs

Castle Lane, Belfast

Kiko Milano

Arthur Street, Belfast

The Entertainer

Castle Court, Belfast

Sostrene Grene

Ann Street, Belfast

Shuropody

Ann Street, Belfast

Studio Souk

Ann Street, Belfast

Holland & Barrett

Forestside SC, Belfast

Argento

Forestside SC, Belfast

Swarovski

Foyleside SC, Derry

B&M

Ards Shopping Centre, N’Ards

TK Maxx

Ards Shopping Centre, N’Ards

JD Sports

Ards Shopping Centre, N’Ards

Superdry

The Quays SC, Newry

The Range

Braidwater Retail Pk, Ballymena

B e lf a s t h a s s e e n a n u m be r o f n e w retailers opening stores with Stardivarius, T h e E n t e r t a in e r , K iko Mila n o a n d Da n i s h in t e r io r s r e t a ile r S o s t r e n e Gr e n e s h o r t l y t o o pe n w it h 6 m o r e pla n n e d t h r o u g h o u t t h e P r o vin c e .

Ou t s ide o f B e lf a s t w e h a ve s e e n m u lt iple de a ls r e - in vigo r a t in g A r d s S h o ppin g C e n t r e in Ne wt o w n a r ds w i t h J D, T K Ma x x a n d B & M a ll c o m m i t t i n g t o t h e s c h e m e . T h e de a l wit h T K M a x x is t h e ir f ir s t n e w s t o r e in NI fo r a n u m be r o f ye a r s w h ic h will s o o n b e f o llo we d by t h e ir n e w s t o r e a t t h e r e de ve lo pe d L a ga n ba n k R e t a il P a r k in L is bu r n . A n d in Ne wr y S u pe r d r y h a ve o pe n e d t h e ir f ir s t s t o r e o u t s i d e o f B e lf a s t in T h e Qu a ys , wh ic h is c u r r e n t l y de ve lo pin g o u t it s t h ir d ph a s e w i t h 100, 000s q f t o f n e w r e t a il s pa c e .

L o o kin g f o r wa r d we see rents in c r e a s in g wit h c o m pe t it ive t e ns i o n f o r s pa c e a lr e a dy a ppa r e n t in B el f a s t .

A c r o s s t h e P r o vin c e we e x pe c t t o s e e va c a n c y r a t e s dr o ppin g a n d do mi n a n t s c h e m e s a n d h igh s t r e e t s s t a r t in g t o f i l l u p wit h t h e n e w e n t r a n t s t o o u r m a r k e t r o llin g o u t s t o r e s .

I ND U S T R IA L Q3 2016 Q u ar te r th r e e no t o nly includ ed th e

A r e c e n t in ve s t m e n t s a le in De r r y l o r a n

q u i e te r

t h is

I n du s t r ia l E s t a t e , C o o ks t o w n c o m pr i s i n g

y e ar was al s o effect ed b y t he Bre x it

80, 529 s q f t a ls o a c h ie ve d s t r o n g le v e l s

d e c i si on . A s a result o f b o t h t ake u p

of

a n d de m an d fell when co mp ared w it h

in ve s t o r s

the f i r st two q uart ers o f t he y e a r .

in du s t r ia l s e c t o r t h a t a f e w ye a r s a go t h e y

Wh i l e th e m ajo rit y o f b usinesses have

w o u ld n e ve r h a ve c o n s ide r e d.

su mmer

mo nt hs,

b ut

in t e r e s t

and

we

gr a du a lly

are

now

m o vin g

s ee i n g

in t o

the

d e l aye d m aking d ecisio ns and ha ve ta k e n a c au ti o us o ut lo o k d ue t o Bre x it

A n in du s t r ia l e s t a t e a t Dr u m a h o e , L a r n e

a n u m be r of manufact uring co mp an ie s

c o m pr is in g c . 63, 000 s q f t h a s r e ce n t l y

in th e e x por t b usiness hav e rep o rte d

c o m e t o t h e m a r ke t o n a f o r s a le b a s i s

in c r e ase s sales d ue t o t he weakenin g

a n d a la r ge in du s t r ia l bu ildin g c o m pr i s i n g

o f th e pou n d.

c.

176, 900

sq

ft

has

come

to

the

m a r ke t t o le a s e in S h o r e B u s in e s s P a r k , T he r e

h ave

tr an sac ti on s

b een in

a

Q3

numb er

of

includ ing

C a r r ic kf e r gu s .

the

for m e r pl asti cs cent re o n S carv a R o a d,

L o o kin g t o w a r ds Q4, o w n e r o c c u p i e r s

Ban br i dge ; co mp rising c. 52,880 s q

a r e s t ill a c t ive a n d lo o kin g t o pu r ch a s e

ft, 1 Tr e n c h Ro ad , M allus; co mp risin g

e x is t in g bu ildin gs plu s a r e c e n t s u r g e

c. 3 3 ,5 4 6 sq ft and t he wareho us e

in in t e r e s t f r o m t h e le is u r e s e c t o r c o u l d

& of f i c e pr e mises o n Carnb ane Wa y,

t a ke u p s u pply a n d pr o vide po t e n t i a l

Ne wr y; c om p rising c. 29,004 sq f t .

a lt e r n a t ive u s e s .

T he se tr an sact io ns sho w a t rend o f o wn e r - oc c u piers b eing t he d o min a n t for c e i n th e market p resent ly.

T he

current

sho rt ag e

of

mo d e r n

DEMAND REMAINS F O R Q UA LI T Y U N I T S

w ar e h ou se u nit s g reat er t han 20,0 00 sq

f t,

loadi n g,

e specially is

wit h

seeing

a

d o ck

le ve l

numb er

of

landlords refurbishing existing units and

LEISURE SECTOR WORTH WATCHING

con si de r i n g inst alling d o ck lev elle r s to sati sf y th is d emand . Po rt ad o wn in p ar ti c u l ar still has limit ed av ailab ilit y w i th a n u m ber o f liv e req uirement s no t b e i n g abl e to b e sat isfied .

RENTS

Y IELDS

S U PPLY

DEMAN D

N OTA B L E IN D U STR IA L T RA N SAC T IO NS Q3 2016 LOCATION

SIZE

TYPE

Channel Business Park, Belfast

10,000 Sq Ft

Lease

Scarva Road, Banbridge

52,880 Sq Ft

Sale

Ferguson Drive, Lisburn

16,081 Sq Ft

Sale

Derryloran Industrial Estate, Cookstown

80,529 Sq Ft

Sale

Trench Road, Mallusk

33,546 Sq Ft

Sale

Carnbane Way, Newry

29,004 Sq Ft

Sale

THE TEAM Behind the research

NIC K Y F IN N IE S TON

DAVID M CN E L L IS

M ana g in g

Direc to r

Direc to r

D i rector

(Retail & Investment)

(Agency)

A NDR EW G AWLEY

STE P H E N C H AM B E RS

AOIF E B RE N N A N

DEC L A N FLYNN

Associ at e D ire cto r

Asso c ia te Direc to r

Direc to r

( A g ency)

(Investment & Finance)

(Research)

Your Property.

Our Business.

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

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