Northern Ireland Property Investment to Exceed £200m in 2014
Investment property transactions in Northern Ireland are likely to exceed £200m in 2014 due to an increase in investor demand, according to Savills Northern Ireland. The property consultants said that the level of stock that came to the market in 2013 increased significantly, which led to a transactional level in the region of £175m – more than the combined total of transactions since the start of the downturn.
Ben Turtle, Director of Investments at Savills Northern Ireland said, “2013 marked a new beginning in the Northern Irish investment market. The increase in business and consumer confidence led to a wide variety of new purchasers entering the market and we expect this momentum to continue in 2014. We are already aware of £100m of stock scheduled to come to market in the first half of the year and with economic conditions improving, we predict that transactional activity will increase this year with volumes exceeding £200m.”
Some notable transactions handled by Savills NI in 2013 included the purchase of the Tesco Extra Foodstore in Newry, which achieved a price in excess of £30m and James House, Belfast which sold for over £10m.
According to Savills a shortage of prime office space in Belfast in conjunction with a limited growth in achievable rental values, has stalled the development of new stock. Recent proposals for the development of new office space in Belfast’s Titanic Quarter and City Quay are unlikely to be completed in the short-term, which may result in firms seeking alternative space in other UK cities or in Dublin.
Neal Morrison, Director at Savills Northern Ireland said, “The lack of available stock should theoretically result in an upward pressure on rents, however, there is a reliance on the tenant base to become more private sector led, as the public sector currently controls the tone in the city. The inability to service the current demand poses a real threat to economic growth as the potential to attract foreign direct investment is debilitated by the lack of available stock.”
Despite the concern, there were some notable office transactions, including the letting of Lanyon Plaza to the Department of Finance and Personnel totalling 98,000 sq ft and the Pinsent Masons acquisition of c.20,000 sq. ft. at The Soloist, two landmark developments controlled by NAMA.
These transactions represented the largest office deals to complete in 2013.
The retail sector is showing signs of recovery and this should continue in 2014, according to Savills. This will be driven by a number of new entrants to the market and existing retailers taking advantage of asset management opportunities. The stabilisation of rents is also expected to continue and possibly increase in more prime locations.
Anne Marie Lonergan, Director of Retail at Savills Northern Ireland said, “9 consecutive months of falling unemployment coupled with overall consumer confidence at a record high has helped to stabilise the retail sector in Northern Ireland. It is also encouraging to see a reduction in the number of retailers entering administration, and whilst it is difficult to predict how many will require financial restructuring this year; we anticipate that the numbers will be down on 2013.”
Savills also noted that the rating revaluation in 2015 could result in a reduction of occupational costs in some retail locations. Ms Lonergan said, “The long awaited rating revaluation will be announced in the latter half of 2014 and we anticipate there will be winners and losers.”
Savills predict an uptake of c.2 million sq. ft. of industrial space throughout Northern Ireland in 2014 as confidence returns to the market. Take up in 2013 was in excess of 1.7m sq. ft. which comprised of 127 transactions made up of 52 sales and 75 lettings. Sales accounted for 865,268 sq. ft. with lettings totalling 867,837 sq. ft.
Neal Morrison of Savills said, “The vast majority of sales in 2013 were to cash buyers and although prices are perceived to be at an all-time low, value for money is driving the demand, especially when comparing the eventual price to the construction cost”. He continued, “The fundamentals of the Industrial sector are beginning to improve as vacancy rates fall and activity in sales and lettings increase. With the current prices being achieved and bank lending starting to become more available, we are of the opinion that sales will continue to dominate market activity in 2014.”
According to Savills, the stability in the residential sector has contributed to a renewed confidence in the residential land sales market with a number of high profile transactions in 2013. The property consultants report that an increase in demand and lack of quality stock in prime locations has resulted in an upward pressure on values. However, there remains a limited appetite from financial institutions to fund speculative development opportunities with the majority of acquisitions being cash funded.
“The market in 2014 is likely to be largely subjective and is dependent on a number of factors. With the banks reluctant to become exposed to speculative development, it is apparent that transactions will remain largely cash funded, with a minority of developers taking full advantage of existing facilities which will fund transactions of larger lot sizes”, said Neal Morrison of Savills.