ECONOMIC SITUATION IMPACTING ON PROPERTY MARKET PERFORMANCE IN NORTHERN IRELAND
October 5th 2010 | The Belfast office of CB Richard Ellis Group (“CBRE”), the international commercial real estate firm, today launched their latest report looking at activity in the commercial property market in Northern Ireland.
► The Northern Ireland economy remains weak and the outlook is uncertain. Fears about further austerity measures, cuts in public spending and a further deterioration in employment in the region is severely dampening consumer confidence, a key ingredient for the property sector. However, despite this, the retail sector is holding up well and retailers continue to expand in the region.
► The economic backdrop is having a notable impact on commercial property market activity in the region with the volume of transactions in the occupier and investment market down on an annual basis. Much of the activity in the occupier markets is emanating from rationalisation activity as occupiers strive to cut costs and agree favourable lease terms in the current environment.
► Rental values appear to be stabilising having corrected over the last 18 months. Prime office rents in Belfast are now approximately £134.50 per m2 (£12 per sq ft) while older buildings are generating approximately £97 per m2 (£9 per sq ft). Prime Zone A retail rents in Belfast are now in the order of £2,000 per m2, having declined by as much as 32% from peak.
► Prime yields in Northern Ireland are also showing signs of stabilising and demand from institutional buyers for prime real estate in the region is very encouraging. Prime office yields in Belfast are now in the order of 6.0% while prime retail yields are in the order of 5.25%.
► As in many other locations, the development pipeline in the North is winding down. There is as much as 1.3 million sq ft of office accommodation in the planning process but the vast majority of these developments are on hold or will simply not be built due to the current market and banking conditions.
► With prime office rents in Belfast some 60% less than in Dublin (even after a 45% decline from peak-to-trough), it stands to reason that if the rate of corporation tax in Northern Ireland is reduced to make it more comparable with the 12.5% prevailing in the Republic, this would significantly boost foreign direct investment and job creation in the region, all of which would be positive for the Northern Ireland property sector.
► There is understandable concern about the long-term implications for the Northern Ireland property market following the imminent transfer of a large portion of NI property loans to the National Asset Management Agency (NAMA).
According to Patrick Koucheravy, Property Economist at CB Richard Ellis, who helped compile the report, “The economy in Northern Ireland is expected to grow by about 1% in 2010. However, further austerity measures are likely to have a significant impact on the region that may dampen any momentum and see this forecast being revised down.”
Brian Lavery, Managing Director of CB Richard Ellis in Belfast, said, “The economic climate in Northern Ireland is having a notable impact on commercial property market activity in the region. Transaction volumes are down and with fears about further austerity measures looming large; demand in many sectors of the occupier markets remains weak. However, there are signs emerging that rental values are stabilising at current levels, having experienced a less pronounced decline from peak than many other jurisdictions and many corporate occupiers are encouraged to negotiate transactions in the current climate considering the relative value on offer. Yields for prime investment properties also appear to be stabilising and while demand for secondary assets remains weak, there have been some recent investment sales concluded in Northern Ireland, which demonstrate the prevailing demand for prime investment opportunities in the region, which is encouraging”.
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About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CB Richard Ellis is the country’s largest commercial real estate services company, now employing over 140 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, project management, consultancy, valuations and research. CB Richard Ellis Ireland has been listed among the top 50 Best Workplaces in Ireland, 2010, for the sixth year running. Please visit our website at www.cbre.ie or www.cbre.ie/ni