www.lisney.com
QUARTER FOUR 20 16 & 2 01 7 OUTLOOK
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 Q 4 2 0 1 6
08
In v es t ment O ut l o o k 2 0 1 7
09
O f fi ce Q 4 2 0 1 6
14
O f fi ce O ut l o o k 2 0 1 7
15
Retail Q4 2016
18
R e t a i l O ut l o o k 2 0 1 7
19
In dus t r i a l Q 4 2 0 1 6
23
In d us t r i a l O ut l o o k 20 1 7
24
T he Tea m B ehi nd T h e Re se arc h
IN T RO DUCTIO N Quarter 4 2016
Hot Air On The Hill J us t
wh e n
pos si bl y
it
seemed
h ol d
any
2016 mo re
co uldn ’ t
m a r ke t s t h o u gh in it ia lly s h a ke n by Tr u m p ’ s
surp ris e s
vic t o r y, t h e ye a r e n de d in r e la t ive ly g o o d
e n te r D on al d Trump wit h his sho ck U S pr esi de n ti al th e
win
Re n e wable
s c a ndal
th at
and
fo llo w
Heat ing
t hat
wit h
Incent ive
sub seq uent ly
sent
s h a pe .
the
L ike t h e EU r e f e r e n du m & U S e l e c t i o n , NI ’ s c o m m e r c ia l pr o pe r t y m a r ke t h ad b o t h
Stor m on t A sse mb ly up in smo ke fo rcin g a
w in n e r s
pe n di n g e l e c ti on.
I n ve s t m e n t vo lu m e s dr o ppe d a lm o s t 5 0 %
and
lo s e r s
t h r o u gh o u t
2016.
in 2016, go in g f r o m 2015’ s f iv e y e a r A s we l ook bac k o n 2016, Q 4 was no le s s
h igh o f £ 420m t o £ 213m , w h ile w e s a w
s u r p r i si n g th an t he rest o f what will be
o f f ic e u p t a ke m o r e t h a n do u ble in 2 0 1 6
r em e m be r e d as a p iv o t al y ear in NI, U K
t o a f ive ye a r h igh o f 535, 000 s q f t a n d
a nd U S pol i ti c s .
r e n t s r o s e by a n u n e x pe c t e d 25% .
Th a nk f u l l y, paralleling t he aft er eff e c t s
Of f ic e va c a n c y in 2016 e c h o e d t he s t o r y
of
in 2015 wit h t h e s ign if ic a n t la c k o f n e w. . .
th e
B r exit
vote
result ,
the
(Continued on page 5)
3
IN V E S T M E N T
I N V ES T M EN T VO L U M ES DOWN B Y 5 0 %
Q4 2016 I n ve stm e n t Vo lumes o f ÂŁ 40m fo r t h e qu ar te r go so me way t o d emo nst r a t e th e pr e vai l i ng challeng es facing t h e I n ve stm e n t s ect o r at t he mo ment ; t h e tr i gge r i n g of art icle 50, lo cal p o lit ic a l tu r m oi l an d t he p o t ent ially m o r e pr ote c ti on i st ag end a co ming o ut o f t h e U S. H owe ve r , desp it e t his t he market h a s r em ai n e d r e lat iv ely ro b ust in a numbe r of ar e as. We hav e seen t he ret ur n o f th e U K pe n sio n fund s t o t he p ro v in c e , a cqu i r i n g the DS G inv est ment a t Spr u c e f i e l d, a welco me sig n t hat t h e y a re c om f or tab le wit h t he lo ng er t e r m s u stai n abi l i ty and resilience o f o u r m ar k e t. P en si on bu yers st rug g le t o sou r c e good qu al i t y p ro d uct result ing in c on si de r abl e co mp et it iv e t ensio n in
4
PEN S I O N FU N D S EY EI N G T H E R I GH T PR O D U C T
S T R O N G L OCA L D EM A N D FOR QUALITY OPPORTUNITIES
RENTS
Y IELDS
S U PPLY
DEM A N D
th e su b £3 m seg ment , we hav e seen a c t ivit y from h i gh net wo rt h ind iv id uals wit h th e we l c om e ret urn of t ra dit io n a l s e n i or de bt f inance, and ind ig eno u s pr o p c o’ s c h asi n g t he mo re asset mana ge m e n t inte n si ve opport unit ies. On e of th e m ost sig nificant t ransact io n s du r in g th e qu ar te r was t he p urchase o f Lis n a ge lvin Sh oppi n g C e nt re in Derry b y Co r da t u s P r ope r ty Tr u st fo r 7.9%, t he 110,000 s q f t s c h e m e i s an c ho red b y Tesco and ad jo in e d by a c ove r e d m al l .
Hot Air On Th e Hill ( Continued from page 3)
. . . Gr a de
A
de ve lop m e n t
dr ivin g t h e r e f u r bis h me n t o f
One of the most significant transactions of Q4 was the purchase of Lisnagelvin Shopping Centre 48.1%
L is ne y
advi se d
on
t he
51.9%
acq uisit io n
of
the
Wa te r si de an d No rt h To wer at Cla r e n do n D o ck ,
a
m u l t i-t enant ed
o ffice
inv e s t m e n t
e x te n di n g to 4 3,000 sq ft which was a c qu ir e d on be h al f of a priv at e client .
o lde r Gr a de B s t o c k. T h e r e t a il s e c t o r pr o ve d t o b e t h e r e a l w in n e r o f t h e p a s t 1 2 months
s h o win g
c o nt i n u e d
im pr o ve m e n t w it h t h e s e c t o r e x pa n din g a t it s f a s t es t r a t e s in c e 2002. T h is pr o g r e s s r e s u lt e d in
in
P r im e
B e lf a s t
vacancy
dr o pping
to
10. 5% t h is ye a r . T h e l o w e s t le ve l
s in c e
our
survey
be ga n in 2011. Ow n e r t h e ir
o c c u pie r s
c on t i n u e
do m in a n c e
in
the
in du s t r ia l s e c t o r a n d 2 0 1 6 h a s s e e n va c a n c y r a t e s d r o p by 25% o n 2015 w i t h a n in c r e a s e in t a ke u p o f 1 2 . 5 %
Th is ac ti vi ty was sup p lement ed b y a n u m be r
in
the
same
pe r io d
of s m al l e r tr an s act io ns, includ ing t he s a le o f
po t e n t ia l
a s ubl e t Mc D onald s Inv est ment in L is bu r n ,
in t h e f o r m o f t h e ‘ R a t e s
a nd th e pe n di ng sale o f g o v ernmen t o f f ic e
R e t h in k’
inve stm e n t at Fo y le Chamb ers, Lo nd o n de r r y,
c u r r e n t ly o u t f o r c o n s ul t a t i o n .
h e a dwin d do c u m e n t
as
a
looms that
is
both of wh i c h were sub ject t o a g reat de a l o f inte r e st.
5
I NV E S T M E N T VO LUMES Q4 2016 I NVE S TME NT VO L U ME S
Wh i l st th e v o lumes and numb er o f tr an sac ti on s
are
t hinner
t han
t he
20 16
sam e pe r i od last y ear t he macr o c l i m ate goe s so me way t o exp lainin g th at.
£120m
N on e th e l e ss t he fund ament als aro un d ou r m ar k e t co nt inue t o st reng t hen in de m an d r e mains st ro ng . T here a r e good r e ve r sio nary ang les fo llo wing on l y
m ode st
g ro wt h
r e c e ssi on
and
currency
p ro v id es
c r oss
bor der
t he
since
£45m
£40m
weakene d
o p p o rt unit y
t rad e
the
(£) Million
su stai n abl e lo cat io ns where o ccup i e r
and
in
£13.5m
fo reig n
inve stm e n t.
Q1
Q2
Q3
Q4
INV ESTMENT VO L U ME S 20 12 - 20 17 £450m £400m
£400m
£420m
£350m £300m £250m
£213m £175m
£200m £150m £100m
£75m
£50m
2012
6
2013
2014
2015
2016
CU RR E N T LY O N TH E MA R KE T Q4 2016 PROPERTY
SECTOR
Laharna Retail Park, Larne
ASKING PRICE £M
NIY
STATUS
Retail
5.78
8.0%
Available
Quayside, Londonderry
Retail
4.0
9.7%
Agreed
Strabane Retail Park, Strabane
Retail
3.285
8.0%
Available
Foyle Chambers, Londonderry
Retail
3.00
7.0%
Agreed
Vodafone, Upper N’Ards Road,
Office
2.00
8.4%
Available
Belfast
N OTA B LE IN V E STME NT T RA N SAC T IO NS Q4 2016 PROPERTY
SECTOR
£M
NIY
PURCHASER
Lisnegelvin Centre, Derry
Shopping Centre
14.73
7.9%
Cordatus Property Trust
DSG Investment, Sprucefield, Lisburn
Retail
13.925
7.7%
On Bahalf of Pension Fund, Aberdeen
Da Vinci’s, Londonderry
Retail/Office
3.7
9.9%
Private Investor *Off market transactions are not included
7
IN V E S T M E N T OUTLOO K 2 01 7 I n sh or t, u ncert aint y at b o t h a lo c a l
to
a n d n ati on al lev el will co nt rib ut e t o s t a ll
and
in ve stm e n t decisio ns.
T h e m a r ke t is o n a s o lid f o o t in g a n d
o c c u pie r
de m a n d,
rental
gr o w t h
f u n din g
a ppe t it e
r e m a in
strong.
wit h lo w in t e r e s t r a t e s ( a n d a r g u a b l y F ac tor s su c h as p ro t ect io nism fro m t h e
n e r vo u s
US, EU e x i t a nd UK wid e co rp o rat io n t a x
pr o pe r t y
r e du c ti on
pr o po s it io n .
hav e
t aken
so me
of
the
e qu it y
m a r ke t s )
r e m a in s
c o m m er c i a l
an
attractive
p osi ti ve m oment um fro m t he ma r ke t , b u t th e k e y p o int t o co nsid er is t h a t
T h e u n e x pe c t e d t u r n o f po lit ic a l ev e n t s
o ur f u n dam ent als remain st ro ng in a ll
t h is
s ec tor s.
u n t il of
ye a r
has
we ’ r e fronts
pa u s e d
c le a r e r
on
( pa r t ic u la r ly
a c t ivit y, a our
and
n um b e r fu t u r e
We h ave e n j oy ed mo d est b ut sust ain a ble
r e la t io n s h ip wit h t h e EU ) we ex p e c t
ec on om i c
a c t ivit y t o r e m a in r e la t ive ly s u bdu ed .
mon th s,
g ro wt h key
o v er
ind icat o rs
t he in
p ast
12
rela t io n
OF F I C E Q4 2016
A lt h o u gh t a ke u p t h r o u gh o u t t h e y e a r
HE A DLINE R E N T S U P 25% ON 2015
h a s be e n s o m e wh a t c o n s t r a in e d b y a la c k o f h igh qu a lit y s t o c k, Q4 r e a c h e d much
more
e n c o u r a gin g
le ve ls
of
225, 000 s q f t , br in gin g t h e t o t a l f o r t h e
LACK OF GRADE A STOCK
ye a r t o 535, 000 s q f t . A lm o s t h a lf o f t h e s pa c e t a ke n u p
CONTINUES
w it h in
Q4
le t t in g,
TA KE -UP I N CR E ASE O F A LMOST 120 % O N 20 15
in
SUPPL Y
D E MAND
of
the
one
r e de ve lo p e d
C o u n c il will o c c u py 100, 000 s q f t . s it e
on
pu r c h a s e d YI E L D S
that
to
C la r e n do n H o u s e , w h e r e B e lf a s t C i t y
The R EN T S
r e la t e s
in
2015
by and
in ve s t m e n t storey
A de la ide Mc A le e r f o llo win g
from
o f f ic e
BCC, bu ildin g
Street and
was Rushe
s ign if i c a n t the is
10 now
c a pa ble o f o c c u pa t io n .
9
N OTA B LE O F F ICE TA KE -UP Q4 2016 OCCUPIER
SIZE (SQ FT)
LOCATION
Belfast City Council
100,000
Former Clarendon House, Adelaide Street, Belfast
KPMG
39,374
1st & 2nd Floor, The Soloist, 1 Lanyon Place
Axiom
26,100
1st, 2nd & 3rd Floor Lincoln Buildings
A&L Goodbody
10,200
4th Floor, 42-46 Fountain Street
Ormeau Baths Ltd
7,522
40 Linenhall Street, Belfast
CME
6,605
4th Floor, Millennium House, Great Victoria Street
With a limited amount of new development be i n g de l i vered in 2016, it is n o t s u r pr i si n g th at a larg e p ro p o rt io n of t h e tak e u p h as b een recent ly refurb is h e d bu i l di n gs i n an effo rt t o meet g ro w in g de m an d.
I n wh a t is in pa r t a c o n s e qu e n c e o f t h e c u r r e n t m a r ke t dyn a m ic s , w e a r e a w a r e o f s o m e o n go in g dis c u s s io n s wh ic h m a y r e s u lt in pr e - le t s in vo lvin g bo t h pr i v a t e a n d pu blic s e c t o r t e n a n t s wit h l a r g e r e qu ir e m e n t s .
B e l f ast Har bo ur Co mmissio ner’s C it y Qu ays c on tinues at p ace wit h t h e 9 4,5 2 7 sq f t CQ 2 d ue t o b e d eliv e r e d in th e Su m mer o f 2017. We ex pe c t th e r e to be l it t le o t her new b uild of f ic e de ve l opm e n t in t he cit y cent re in 2017 th ou gh r e f u r b ishment p ro ject s will h e lp f ill th e voi d.
T h is is s o m e t h in g wh ic h h a s n o t b e e n s e e n in o u r m a r ke t in r e c e n t ye a r s a n d i s a m a r ke r o f c o n t in u e d c o n f ide n c e f r o m po t e n t ia l o c c u pie r s .
A t a h e adl i n e rent which we und ers t a n d to be i n th e reg io n o f £ 21.50p sf, t h e de al i s a po sit iv e st ep as rent s e dge towar ds m o re v iab le d ev elo p m e n t leve l s.
10
535,000
400,000 Square Feet
K P MG’s r e c ent acq uisit io n o f c. 39, 000 s q f t at th e So lo ist Build ing rep res e n t s th e l ast si gnificant G rad e A sp ac e in B e l f ast C i ty Cent re.
TA K E - U P 20 12- 20 17
348,000 260,000 209,000
2012
2013
2014
2015
2016
LANDLORDS HAVE A FINGER ON THE RENT REVIEW TRIGGER Q4 2016 Th e
l ast
12
mo nt hs
has
seen
F o r m a n y ye a r s w e h a d be e n w e l l
de m on str abl e
g ro wt h
A
a c qu a in t e d w it h t h e “ n il in c r e a s e o n
of f i c e r e n ts.
Desp it e t he uncert a in t y
r e vie w ”, wh ic h h a s m e a n t a la c klu s t r e /
in
G rad e
of B r e x i t, th e co nt inuing p o lit ical a n d th e
f i n an c i a l
challeng es,
t he
almost non-existent rent review market.
ma r ke t
h as gr adu al l y and st ead ily g o t b et t e r .
No w t h e t ide h a s t u r n e d a n d w h i l e t e n a n t s w ill n o t be e n t h u s e d a t a l l
B u bbl i n g of f ice rent al g ro wt h fro m e a r ly
by t h e pr o s pe c t o f a lo o m in g r e n t
2 01 5 h as m a t ured in 2016 wit h mate r ia l
r e vie w da t e , t h e y s h o u ld e n s u r e t h e y
inc r e ase s
u n de r s t a n d t h e pr o c e s s a n d m it ig a t e
no w
b eing
und erp in n e d
t h e ir c o s t po s it io n . T h e r e is a lmo s t
by r e c e n t l and mark let t ing s.
a lwa ys a n a n gle t o e x plo it o r a r gu m e n t For m an y years, inv est o rs in Belf a s t
t o m a ke .
of f i c e stoc k co uld o nly rely o n v ari a ble in
H o w e ve r , t h e le ga l c o m ple x it ie s o f r e n t
c api tal val u e s , b ut as a result o f t he n e w
r e vie w m e c h a n is m s , t h e pr o s pe ct o f
letti n gs th r o ug h 2016, t he p ro s pe c t
r e f e r r a l t o A r bit r a t io n , a n d t h e t e c h ni c a l
of e n j oyi n g healt hier rent al ret urns o n
in t e r pr e t a t io n s
th e i r i n ve stment s is no w likely.
s pe c ia lis t a r e a a n d h a s t o be c a r ef u l l y
yi e l d
sh i f ts
to
g enerat e
g ro wt h
mean
that
it
is
a
m a n a ge d. T h e s t a ke s a r e be in g r a i s e d New
of f i c e
let t ing s
h ave
m ove d
head line
in
Q4
rent s
2016 at
the
with every new headline letting inevitably le a din g
to
c o n f lic t in g
la n dlo r d
and
top e n d to aro und £ 21.50 p er s q f t
t e n a n t vie w s o n t h e r e le va n c e a n d
r ef l e c ti n g an increase o f 25% in p r im e
w e igh t o f e vide n c e .
of f i c e r e n ts i n t he last 12 mo nt hs. W h ile la n dlo r ds w ill n o w be h a p p i l y Mode r n of f i ce inv est ment s in Be lf a s t
r e f le c t in g t h e pr o s pe c t o f gr o w t h o n
a re typi c al l y let o n 10 o r 15 ye a r
r e vie w o n t h e ir a s s e t va lu a t io n s a n d w e
lease s, som et imes wit h b reak o p tio n s
a ll c a n a r gu e t h a t a h e a lt h ie r f u n c t io n i n g
f or te n an ts t o exit early, b ut alm o s t
o f f ic e m a r ke t is wh a t B e lf a s t n ee d s ,
a lways wi th a rent rev iew p ro v isio n o n
t h e m o ve m e n t in t h e m a r ke t is like l y t o
a 5 ye ar l y b asis t o neg o t iat e rents t o
c o m e a t a pr ic e f o r o f f ic e t e n a n t s w i t h
m ar k e t r e n tal lev els.
r e n t r e vie w s f a llin g du e in 2017.
11
O F F I C E RE N T S Q4 2016 BELFAST HEAD L I NE R E NTS 20 12- 20 17 £23.00 £22.00
£21.50
£21.00 £20.00 £19.00 £18.00 £17.00
£15.50
£16.00
£17.00
£15.00 £14.00 £13.00
£12.50
£12.50
£12.00
£13.00
£11.00 2012
2013
2014
2015
2017
2016
2018
C I TY CO M PA RISO N UK C ITY HEADL I NE R E NTS 20 12- 20 17 £60.00 £55.00
£55.00 £50.00 Prime Office Rents
£45.00 £40.00 £35.00 £30.00
£30.00
£25.00
£25.00
£20.00
£21.50
£15.00 £10.00 £5.00
2012
2013 Belfast
12
2014 Dublin
2015 Cardiff
2016 Glasgow
AVAI L A B IL IT Y
Square Feet
GRADE A v G R A D E B 850,000 800,000 750,000 700,000 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000
Grade A Grade B 680,000
657,000
393,000 340,000
338,000
330,000 265,000
250,000
150,000
2012
2013
2014
135,000
2015
A s c an be s een fro m t he g rap h ab o ve
In
a ddit io n
th e ove r al l trend fo r o ffice st o ck le ve ls
on
s i n c e 2 0 1 2 i s falling .
A ve n u e ;
The
2016
w o r ks
We a vin g 28, 848
sq
are
c o m m e nc i n g
Wo r ks , ft,
Or m e a u
L o n do nd e r r y
H o u s e , C h ic h e s t e r S t r e e t ; c . 70 , 0 0 0 N otabl y,
th e
G rad e
A
st o ck
leve ls
r eve al e d th r oug h o ur research at t h e
s q f t a n d B r u n s wic k H o u s e , B r u n s w i c k S t r e e t ; 50, 000 s q f t .
e n d of 2 0 1 6 is o nly c 135,000 sq ft . A s a lr e a dy m e n t io n e d C it y Qu a ys 2 i s U nde r l yi n g this head line fig ure we ha ve
t h e o n ly n e w bu ild s c h e m e c u r r e n t l y
e stabl i sh e d t hat t here are no new la r ge
c o m in g o u t o f t h e gr o u n d a n d is b e i n g
f lo or pl ate s av ailab le in t he cit y ce n t r e
constructed
(ie. gr e ate r than 5,000 sq ft ) which will
C o m m is s io n e r s wh o a r e n o t r e lia nt o n
undoubtedly be noted by the FDI market.
t r a dit io n a l f u n din g a n d a lr e a dy o wn t h e
by
the
B e lf a s t
Ha r b o u r
la n d. Th e r e n otabl e to
ar e
ho wev er
sc hemes
be c om e
a
numb er
which
av ailab le
are
t his
of
like ly
T h e m a jo r it y o f a ll n e w s t o c k h a s b e e n
co min g
a n d will c o n t in u e t o be r e f u r bis h m e n t o f
ye ar i n c l u di ng Cit y Q uay s 2; 94, 527 sq
f t,
Ri ve r
Ho use;
90,000
sq
e x is t in g Gr a de B s t o c k.
ft
a nd Fl ax House; 28,598 sq ft .
13
O F F I C E O U T L OO K 2 01 7 Th e pr ospe c t o f d ev elo p ment co nt in u e s
A lt h o u gh t h is is po s it ive n e w s , de l i v e r y
to str e n gth en wit h p lanning co ns e n t
t im e s c a le s a r e like ly t o r u n f r o m 2 0 1 8
r ec e n tl y
o n w a r ds
r enewed
D e ve l opm e n t s
on
o wned
t he
Or by
sit e
on
C h i c h e ste r S t reet . Th e
si te
r e f u r bis h m e n t
schemes
a r e like ly t o plu g t h e s h o r t t e r m s u p p l y ga p.
which
enc o m -
W it h t h is in m in d, we e x pe c t t o s e e
passe s a 1 980s o ffice b uild ing a n d
s t r o n g de m a n d f o r t h e r e m a in in g s p a c e
c ar
par k
of-
w it h in t h e r e c e n t ly r e f u r bis h e d L inc o l n
fer
1 0 0 ,0 0 0sq
Other
bu ildin g o n Gr e a t V ic t o r ia S t r e e t a n d
pl an n i n g app ro v als includ e Kilmo n a ’ s
pr o je c t s s u c h a s F la x H o u s e w h ich i s
E ast B r i dge S t reet and M cAleer & R us h e s
s e t t o be c o m ple t e d in Q4 o f 2017 .
has
current ly
t he ft
p o t ent ial of
to
sp ace.
B e df or d Square.
D EF I N IT IO N S I n ou r r e se ar ch we use t he fo llo wing t o c ate gor i se office sp ace:Gr ade A : N ew o r refurb ished b uildin gs or su i te s f i tt ed wit h fully access ible f lo or s, su spend ed ceiling s, lig ht ing a n d a ir c on di ti on ing . Gr ade B : Pr ev io usly o ccup ied b uil din g or
su i te s
oc c u pati on
which b ut
are
wo uld
cap ab le b enefit
of from
r ef u r bi sh m e nt . Gr ade C : Pr ev io usly o ccup ied b uildin gs or suites which are not capable of occupation
14
so
RE TA IL Q4 2017
Qu ar te r 4 saw Lisney und ert ake o u r
in 2015, bu t m o r e im pr e s s ive ly d o w n
a nn u al Re tail Vacancy S urv ey w h e r e
f r o m a lm o s t 20% in 2014. S o B e l f a s t
w e c ou n t vacant sho p s in 17 o f NI ’ s
h a s go n e f r o m 1 in 5 s h o ps b e i n g
m ai n c i ti e s and t o wns. And as exp e c t e d
va c a n t in 2014 t o 1 in 10 in 2016!
w e saw an o t her y ear o f imp ro v em e n t a cr oss th e bo ard .
The positivity in the retail sector was further evidenced in the Ulster Bank Purchasers
P ri m e
vac ancy
in
Belfast
d ro p pe d
Ma n a ge r s I n de x w h ic h s a w it s f a s t e s t
to i ts l owe s t lev el since o ur sur ve y
r is e in 2 a n d a h a lf ye a r s in De c em b e r
be gan to 1 0.5%, d o wn fro m 12 . 5%
16 wit h r e t a il be in g t h e bigge s t d r i v e r
a nd th e se c to r exp and ing at it s fas t e s t r ate si n c e th e ind ex b eg an 14 y ears a go .
w h o m h a ve t a ke n n e w s t o r e s in lo c at i o n s a c r o s s t h e P r o vin c e .
P ri m e vac ancy acro ss t he p ro vin c e a s a wh ol e was red uced b y 0.8% t o 1 3.8 % . Th e s e numb ers co mp are t o t h e U K ave r age o f 9.5% acco rd ing t o t h e B RC / Spr i n gb o ard F o o t fall & Vacan c ie s m on i tor .
Ne w e n t r a n t s in t o o u r m a r ket i n 2016 h a ve in c lu de d r e t a ile r s s u ch a s S t r a da va r iu s , S o s t r e n e Gr e e n , K i k o Mila n o , T h e E n t e r t a in e r , a n d M o s s B r o s . We h a ve a ls o s e e n t h e f o o d a n d be ve r a ge o pe r a t o r s be in g a c t ive w i t h n e w e n t r a n t s t o o u r m a r ke t s u ch a s Z iz z i, Gr e ggs a n d P a t is s e r ie Val e r i e jo in in g t h e like s o f Na n do ’ s , P i z z a E x pr e s s , P r e z z o , C o s t a , Ne r o a n d S t a r bu c ks in t a kin g n e w s t o r e s .
Th e l oc al ret ail market co nt inu e s to pe r f or m well wit h co nsu m e r c on f i de n c e hig h, emp lo y ment b ac k t o pr e - c r i si s l e vels wit h real t erms wa ge gr owth f or t he seco nd co nsecu t ive
PRIME RE TA I L VACA NC Y 20.00% 18.00%
Vacancy %
16.00% 14.00% 13.8%
12.00%
10.5%
10.00%
9.5%
8.00% 6.00%
2012
2013 Belfast
NI
2015
2016
UK
ye ar an d a larg e increase in cr o s s bor de r sh op p ers exp lo it ing the f avou r abl e e xchang e rat e.
N EW EN T R A N T S CO N T I N UE
2 01 6 saw stro ng d emand fro m ret a ile r s in B e l f ast where we hav e s e e n c om pe ti ti ve b id d ing fo r p rime st or e s , bu t al so ac ro ss t he Pro v ince wit h t h e bor de r town s b eing esp ecially sou gh t a fte r du e t o t he increased c r o s s bor de r tr ade .
VACA N C Y R AT ES S T EA D I LY
Re tai l e r s who hav e b een p art icula r ly a cti ve e x pand ing t heir NI p o rt fo lio s inc l u de , N e x t , JD, B&M , T K M axx all o f
16
2014
TO S H OW S T R O N G D EM A ND
R ED UC I N G
RENTS
Y IELDS
S U PPLY
DEMAN D
N OTA B L E RE TA IL TR A N SACTIO NS Q4 2016 RETAILER
LOCATION
RETAILER
LOCATION
Newbridge Silverware
Arthur Street, Belfast
Pizza Express
St Anne’s Square, Belfast
Patisserie Valerie
Castle Lane, Belfast
Gym Co
Cityside, Belfast
Zizzi
Victoria Square, Belfast
Nandos
Abbey Centre, Newtownabbey
Thomas Cook
Victoria Square, Belfast
Wagamama
Omni Retail Park, Dundonald
Superdrug
Bloomfield SC, Bangor
Swarovski
Foyleside, Derry
Greggs
Fairhill SC, Ballymena
Toys R Us
Castle Court, Belfast
Nationwide
Donegall Place, Belfast
17
R E TA IL O U T L OO K 2 01 7 Th e r e tai l land scap e co nt inues t o impr ove de s p it e t he Brexit v o t e w it h f al l i n g vac ancy rat es in Belfast c it y c e n tr e pl ac i ng furt her up ward s p res s u r e on r e n ts wi th Zo ne A no w t rend in g a t £1 2 5 psf f or p rime cit y cent re p it che s . Th e r e tai l sto ry has b een b uo y ed fur t h e r by a de valued p o und enco ura gin g s h oppe r s f r om t he R ep ub lic t o v ent u r e n or th . B o r 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 rec e n t m on th s an d t his 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 Ennisk ille n h ave al l se en increased numb ers o f s h oppe r s c oming no rt h.
Er n e s ide S h o ppin g Centre in En n is kille n has r e c o r de d in cr e a s e d f o o t f a ll o f a r o u n d 10% in J u l y a n d A u gu s t c o m pa r e d t o t h e s a m e m o n t h s la s t ye a r , wit h 80% of r et a i l e r s r e c o r din g s a le s gr o w t h o f be t w e e n 4 % 40% . T h e o u t lo o k f o r 2017 is po s it iv e w i t h c o n t in u e d de m a n d f o r pr im e s pac e a n d a n u m be r o f n e w r e t a il de ve lop m e n t s s u c h a s Tu r kin gt o n s L a ga n ba n k s c h e m e in L is bu r n a n d P a r ke r Gr e e n ’ s e xt e n s i o n t o t h e Qu a ys in Ne wr y c o m in g o n s t r e a m . We s e e pr im e B e lf a s t z o n e A r e n t s im pr o vin g f r o m t h e c u r r e n t le v e l o f £ 130 pe r s qu a r e f o o t a n d va c a n cy r a t e s c o n t in u in g t o r e du c e .
METH O DO L OG Y T he data was co mp iled fro m a sample o f
The following categories are excluded;
1 7 town s an d cit ies acro ss t he p rovin c e
pr o pe r t ie s t h a t a r e de r e lic t , ba r s o r
w hi c h we r e surv ey ed d uring July a n d
pu blic
Au gu st 2 0 1 7 .
gr o u n d f lo o r o f f ic e s t h a t do n o t h a v e a
houses,
lic e n s e d
r e s t a u ra n t s ,
pu blic e n t r a n c e ; o u t o f t o wn f a s t f o o d T he sam pl e co mp rised : Belfast , Ne wr y,
o u t le t s
Lon don de r r y,
c o n s ide r e d t o be in pr im e o r s e c o nd a r y
Lisb urn,
Ennis kille n ,
Bal l ym e n a, Co leraine, O mag h, Craiga vo n , Po r tadown ,
Bang o r,
and
that
are
not
po s it io n s .
Newt o wn a r ds ,
Cookstown, Antrim, Strabane, Newtownabbey
P r im e a n d s e c o n da r y pit c h e s h a ve b e e n
a n d Magh e r afelt .
c la s s e d a s s u c h a c c o r din g t o L is ne y ’ s r e t a il t e a m .
H avi n g su r ve y ed t he p rime, seco nd a r y a n d maj or ou t of t o wn sit es acro ss t he sa m ple , v ac an t u n i t numb ers were mad e u p o f p r ope r ti e s th a t are uno ccup ied .
18
pr o pe r t ie s
I ND U S T R IA L Q4 2016
OWN E R-OCCU P I E R S CON TIN U E DO MI N A N CE
VACA N CY DOW N B Y 25%
‘RATES RE T H I N K’ LOO MS FOR L A N D LO R D S
R EN T S
Y IE L D S
SUPPL Y
D E MAND
There h a ve be e n a n u m be r of t r a n s a c t io n s in Q4 in c lu din g t h e s a l e o f t h e f o r m e r A c h e s o n Glo ve r bu i l d i n g in C a r n ba n e , Ne w r y; c o m pr is in g c . 75, 886 s q f t , K ilke e l B u s in e s s P a r k , K ilke e l c o m pr is in g c . 60, 155 s q f t a n d va r io u s pr e m is e s in Gr e a t e r B e l f a s t , Po r t a do w n , C a r r ic kf e r gu s a n d L is b u r n t o n a m e a f e w. These t r a n s a c t io n s are ag a i n s h o win g a t r e n d o f o w n e r - o c c up i e r s be in g t h e do m in a n t f o r c e bu t t h i s i s m a in ly du e t o t h e s u pply o f a va i l a b l e u n it s t o pu r c h a s e in t h e m a r ke t . He a dlin e s t o c k in o ve r £ 4 r e a c h in g
in du s t r ia l r e n t s f o r e x i s t i n g go o d lo c a t io n s a r e a c h iev i n g pe r s q f t wit h c a pit a l va l u e s £ 45 pe r s q f t .
19
IIND N DUUSSTTRRIA IA LL Q4 Q4 2016 2016 Qu ar te r
4
ag ain
saw
a
numb e r
of
The
tr an sac ti on s, b o t h sales and let t in gs ,
and
pr ovi di n g a p o sit iv e end t o t he ye a r .
m a n u f a c t u r in g c o n t r a c t w it h S c o t t i s h
Ta k e u p f i gures fo r 2016 were o ve r
po we r
2 .0 m sq f t, up o n 2015 which wa s
s u ppo r t
a p pr ox i m ate l y c. 1.6m sq ft .
a n n o u n c e m e n t by t h e Ec o n o m y Min i s t e r ,
announcement Wo lf f
S im o n
of
s e c u r in g
R e n e wa ble s 200
ÂŁ 20m
that
jo bs
H a m ilt o n ,
a
Harland
plu s s t a t in g
it
major
s a ys
the that
will
recent over
Wh i l e th e year saw a numb er o f h igh
t h e la s t 12 m o n t h s , No r t h e r n I r e l a n d
pr of i l e c om panies anno uncing clo sur e s ,
was
posi ti ve l y a numb er o f manufact ur e r s
K in gdo m t o s e e a n in c r e a s e in e xp o r t s
h ave
( a 9. 5% r is e ) is w e lc o m e go o d n e w s .
e x pe r ienced
vol u m e s
due
to
a
increased
expo r t
weaker
p ou n d,
the
o n ly
pa r t
of
the
Un i t e d
a ll i e d wi th the t ake up fig ures, t his is e n c ou r agi n g.
N OTA B L E IN D U STR IA L T RA N SAC T IO NS Q4 2016
20
LOCATION
SIZE (SQ FT)
STATUS
Carnbane, Newry Aceson & Glover Building
75,886
Sold
Kilkeel Business Park, Kilkeel
60,155
Sold
Mahon Industrial Estate, Portadown
8,913
Let
8 Duncrue Street, Belfast
5,100
Let
Sloefield Business Park, Carrickfergus
3,880
Let
Channel Commercial Park, Belfast
3,752
Let
INDUSTRIAL RATES CHANGES LOOM Q4 2016 D espi te some p o sit iv e act iv it y in t h e s e c tor i n th e fo rm o f ind ig eno us g ro wt h a nd e x por t success st o ries t here is a pote n ti al head ache lo o ming f o r la n dl or ds of v acant ind ust rial p ro p ert ie s . Th e ‘Rate s Ret hink’ d o cument p repa r e d by D FPN I that has b een issued f o r c on su l tati on has p ro p o sed that indu str i al v acant rat ing relief is a b ol i sh e d. A t pr e se n t, qualify ing v acant ind us t r ia l pr ope r ti e s do no t at t ract v acant ra t e s . Th e ‘Rate s R et hink’ p ro p o ses t hat t h e ini ti al 3 m ont h 100% rat ing exempt io n a p pl i e d to pr op ert ies (acro ss all secto r s ) s h ou l d be end ed and t hat the c u r r e n t 1 0 0 % v acant rat ing exempt io n f or qu al i f yi n g ind ust rial* p ro p ert ies w ill be abol i sh e d and a charg e o f 75% o f th e f u l l oc c u p ied liab ilit y b e charg e d. Th i s m ay l e ad t o t he d emo lit io n o f lo n g te r m vac an t ind ust rial b uild ing s w h ic h a re si tu ate d i n lo cat io ns which wo uld n o t be r e gar de d as est ab lished /d esir a ble c om m e r c i al l ocat io ns. Pro p ert ies w h ic h a re date d and are no t suit ab le f o r c u r r e n t oc c up ier d emand s mig ht f a c e th e sam e e n d . L an dl or ds of such b uild ing s hav e t h e pote n ti al to be hit b y a ‘d o ub le whamm y’ in th at th e demo lit io n o f such b uild in gs m ay n ot tota lly mit ig at e v acant ho ldin g c osts as th e int ro d uct io n o f a ‘d ere lic t la n d l e vy’ i s current ly b eing co nsid e r e d.
‘ S pu r r in g e c o n o m ic gr o wt h ’ is t h e a i m o f t h e ‘ R a t e s R e t h in k’, h o w e ve r , s ev e r a l a s pe c t s o f t h e pr o po s a ls po in t t o t h e m h a vin g t h e o ppo s it e e f f e c t . I t is u n like ly t h a t f u r t h e r in c e n t ives f o r Landlords of long term vacant properties w ill r e s u lt in in c r e a s e d t e n a n c ie s a s , i n t h e m a jo r it y o f in s t a n c e s t h e r e s i m p l y is n ’ t t h e o c c u pie r de m a n d. I t c o u ld a ls o be a r gu e d t h a t t h e in t r o du c t io n o f s u bs t a n t ia lly in c r e a s e d h o ldin g costs in the form of va c a n t r a t e s a n d/o r a de r e lic t la n d l e v y f u r t h e r dim in is h e s t h e pr o s pe ct o f de ve lo pm e n t . S pe c u la t ive in du s t r ia l de ve lo p m e n t is o f t e n n o t f e a s ible in e s t a bli s h e d c o m m e r c ia l lo c a t io n s le t alone s e c o n da r y/t e r t ia r y c o m m e r c ia l sites w h e r e a la r ge pr o po r t io n o f lo n g t e r m va c a n t in du s t r ia l s pa c e c u r re n t l y e x is t s a n d du e t o t h e s c a le o f in du s t r ia l pr o pe r t ie s t h e s e pr o pos a l s h a ve t h e po t e n t ia l t o c r e a t e va c a n t h o ldin g c o s t s in t h e t e n s if n o t h u n d r e d s o f t h o u s a n ds o f po u n ds . * P l e a s e n o t e t h a t t h e r e i s a di f f e r en t i a l be t w e e n a n ‘ i n du s t r i a l ’ p r o p e r t y w h i ch q u a l i f i e s f o r va c a n t r a t i n g r e l i e f a n d a warehouse.
I ND U S T R IA L Q4 2016 INDU STRIAL VACA NC Y R ATE S 20 15/ 20 16
14%
Dublin Average
15%
6.6% UK Average
6.4%
7.4% NI Average
9.9%
1.5% Newry
6.4%
5.5%
Dargan/ Duncrue
7.8%
15.1% Mallusk 15.5%
5% Available Space % 2016
10%
15% Available Space % 2015
20%
I ND U S T R IA L O UTLOO K 2 01 7 L ac k of su pp ly, in p art icular fo r la r ge r
T h e r e a r e a n u m be r o f a c t ive o c c u p i e r s
s pac e ove r 50,000 sq ft will rem a in a
w h o h a ve va r io u s s pe c if ic r e qu ir em e n t s
c on c e r n .
a n d t h e y a r e n o w lo o kin g a t de s ig n a n d bu ild o pt io n s a s t h e NI m a r ke t l a c k s
I n c e r tai n a reas o wner o ccup iers a r e
these buildings. That said only a limited
payi n g a premium fo r suit ab le s pa c e
a m o u n t o f s pe c u la t ive n e w s t o ck w i l l
as
e n t e r t h e m a r ke t u n t il r e n t s r e a c h v i a b l e
th e
de mand
is
o ut st rip p ing
the
s u ppl y.
development levels of above £5 per sq ft.
D e m an d f or sp ace less t han 20,00 0 s q
A po t e n t ia l h e a da c h e a ls o lo o m s i n t h e f o r m o f t h e m e a s u r e s pr o po s e d i n t h e ‘ R a t e s R e t h in k’ do c u m e n t c ur r e n t l y is s u e d f o r c o n s u lt a t io n .
f t r e m ai n s s t ro ng , ho wev er d esig n a n d bu i l d pr oj e c t s will b eco me increas in gly c e n tr al of
in
l ar ge r
meet ing
t he
o ccup iers
req uirem e n t s and
sp e c if ic
r equ i r e m e n ts ; such as o v erhead cra n e s , c ol d stor e s, fo o d p ro d uct io n, a la r ge powe r su ppl y and hig h eav es heig ht wit h good yar d / circulat io n areas.
M E T H O DO LOGY We c ar r i e d out a surv ey fro m a sample o f 3
T h e f o llo w in g c a t e go r ie s a r e e x e m p t :
p r om i n e n t i n d ust rial lo cat io ns in Nor t h e r n I r e l an d a vai l abl e
to
assess u nit s,
t he
p ercent age
ev aluat e
t rend s
of
P r o pe r t ie s t h a t a r e de r e lic t .
and
com par e to nat io nal st at ist ics.
Ot h e r
pr o pe r t y
lo c a t io n s T he
l oc ati ons
cho sen
were
Ne w r y
that
uses w o u ld
wit h in not
the
n o rm a l l y
f a ll wit h in c la s s e s B 2, B 3 & B4 o f
(Carnbane & Greenbank Industrial Estates) ,
the
Du n c r u e / D ar gan and M allusk.
( No r t h e r n I r e la n d) 2015, t o in c l u d e
P la n n in g
e du c a t io n a l
(Use and
C la s s e s )
s po r t in g
Order
f a c il i t i e s ,
H a vi n g su r ve y ed t he lo cat io ns, t he v a c a n t
pu r e ly o f f ic e pr o pe r t ie s , r e s t a u ra n t s ,
un i ts c om pr i se p ro p ert ies t hat are o pe n ly
r e t a il s h o ps e t c .
mar k e te d as av ailab le.
TH E T E A M Behind the research
DECL A N FLYNN
24
NIC K Y F IN N IE S TON
DAVID M C N E L L IS
M anagin g
Direc to r
Direc to r
D i rec t or
( Retail & Investment)
(Agency)
G A RET H JO HN S TON
CI AR A N O’ K AN E
AN DR E W G AW L E Y
Di r ect or
Direc to r
A sso c ia te Direc to r
( Pro f es s i o n al Se rv i ce s)
(M anagement)
(Agency)
S T EP H EN CH AM BERS
AO IF E B R E N N A N
Associ at e D ire cto r
Direc to r
( I n v es t m en t & F i nance )
(Research)
www.lisney.com
LISNEY NORTHERN IRELAND 1st Floor Montgomery House 29-33 Montgomery Street, Belfast, BT1 4NX 028 9050 1501 belfast@lisney.com
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