northern ireland commercial property report 2013

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  • Northern Ireland CommercialProperty Report 2013

  • The Lisney Northern Ireland Commercial Property Report is now in its thirdyear and is the most comprehensive commercial property study in NorthernIreland.

    As in previous years, this report reviews the state of the local market withinthe Industrial, Investment, Office and Retail sectors and provides commenton what the future may hold.

    Our 2013 research has highlighted that Property Investment transactions inNorthern Ireland have increased six fold over the last two years, albeit from a low base and withoccupier demand stable it would appear that the fundamentals for a sustainable recovery in theproperty market are in place.

    These transactions have primarily been undertaken by UK based institutions in the prime retailsector where demand now outstrips supply. As a result of this lack of supply, attention is nowfirmly on more secondary properties where there are obvious opportunities to create value. Itwill be interesting to see the level of transactions in this sector in the months ahead.

    Despite our obvious optimism there are a number of hurdles to cross before we will seetransaction levels return to normal.

    We previously voiced our concerns with regard to the potential lack of supply of Grade A officespace and the effect that this will have on our wider economy should Northern Ireland becomeunable to provide suitable accommodation for multi-nationals. Our concerns are now a realitywith vacancy levels of 5% and falling.

    Lack of finance in general and specifically development finance is still an issue and there maybe a need for Stormont to intervene in the market to help bring forward the office developmentpipeline to enhance their stated job creation aims. The demand for new Grade A office space isevident but without the appropriate supply in place to meet this demand, we will undoubtedlysee competition for the space that does remain resulting in increased rents within the sector.

    On the retail front we have seen a level of stability return to the market in the last 12 monthsand with consumer confidence rising we can predict this stability will continue in 2014.

    The next 12 months will undoubtedly herald further change in our market place in unexpecteddirections, however we at Lisney believe that the change will be positive and therefore lookforward to the months ahead.

    Declan Flynn BSc (Hons) MRICSManaging Director, Lisney Belfast

    F o r e w o r d

  • Office

    All office space/units surveyed were above1000 sq. ft.

    All Grade A and Grade B office stock wasconsidered. Grade C stock was excluded.

    Research covers all available office premiseson Lisneys database.

    Historic Grade A and B stock figures wereobtained from a report published by theValuation and Lands Agency (Land andProperty Services) in 2006.

    Within this section an SME is defined as acompany with a turnover of no more than6.5million and less than 50 employees(Companies Act 2006).

    Industrial

    To assess the percentage of available units,evaluate trends and compare to nationalstatistics, a survey was carried out from asample of 3 prominent industrial locations inNorthern Ireland.

    The locations chosen were Duncrue/Dargan,Mallusk and Newry (Carnbane and GreenbankIndustrial Estates). Having surveyed thelocations, the vacant units comprise propertiesthat are openly marketed as available.

    The following categories are exempt: propertiesthat are derelict; other property uses within thelocations that would not formally fall withinclasses B2, B3 and B4 of the Planning (UseClasses) Order (Northern Ireland) 2004, toinclude educational and sporting facilities,purely office properties, restaurants/ retailshops, etc.

    Retail

    The Retail data used within this document wascompiled from a sample of 17 towns and citiesacross Northern Ireland which were surveyedduring July and August 2013.

    The sample comprised of: Antrim, Ballymena,Bangor, Belfast, Coleraine, Cookstown,Craigavon, Enniskillen, Lisburn, Londonderry,Magherafelt, Newry, Newtownabbey,Newtownards, Omagh, Portadown andStrabane.

    Having surveyed the prime, secondary andmajor out of town sites across the sample,vacant unit numbers were made up ofproperties that were unoccupied.

    The following categories are excluded:properties that are derelict; bars or publichouses; licensed restaurants; ground flooroffices that do not have a public entrance; outof town fast food outlets and properties that arenot considered to be in prime or secondarypositions. Prime and secondary pitches havebeen classed as such according to Lisneysretail team.

    M e t h o d o l o g y

  • Investment Update

    Transaction Volumes See 6 Fold Increase Since 2011 Overview

    2012 and 2013 have seen an encouraging uplift intotal investment volumes locally despite a significantdownturn in Northern Irelands Commercial Propertymarket due to difficulties in the economy and bankingsectors over the last number of years.

    To date, the total assets sold, under offer or brought tomarket in 2013 exceeds 150 million. Whilstremaining low compared to Great Britain, this is doublethe total transaction volume for 2012, which was c.75 million, and 6 times that of 2011 (c. 25 million).

    This has been followed by a further increase intransactional activity levels and availability of betterinvestment property in 2013 and, mirrored by positiveactivity within the residential development market, is aclear indication that a market recovery may finally beunderway within the Northern Ireland CommercialProperty market. For the first time in a number ofyears demand, particularly from institutional investors,is outstripping supply in the investment market with anumber of bidders being new entrants to the NorthernIreland Property market.

    Notable Transactions

    Notable retail transactions in the last 2 months haveincluded the purchase of Tesco, Newry by ScottishWidows Investment Partnership for 30.30 million, thepurchase of Tesco, Craigavon by British Land for23.50 million and the purchase of B&Q, Craigavon byCordea Savills for 11.90 million. In addition, Lisneyadvised on the sale of Springhill Retail Park, Bangor toPradera/Brockton for 10.45 million and ClandeboyeRetail Park, Bangor which was sold to Threadneedlefor 7.13 million.

    Office investments recently sold include the Invest NIHeadquarters on Bedford Street which was sold to theNorthern Ireland Government for a reported 17million, Scottish Mutual Building, Donegall SquareSouth Belfast, which will be converted into a hotelfollowing its 2 million sale and Killeaton HouseDerriaghy which was sold to a private investor for2.33 million.

    Notable Investment transactions in Northern Irelandsince the beginning of 2012 include the following:

    www.lisney.com

    Property Type Price m Yield Date Comments Purchaser

    Tesco, HighfieldRoad, Craigavon

    Foodstore 23.50m 5.60% Oct 2013 121,000 sq ft foodstore let to Tesco on a 25 year lease from2010 with a break in years 15 & 20. The lease is subject toRPI reviews (no cap or collar)

    British Land

    Tesco, DownshireRoad, Newry

    Foodstore 30.30m 4.95% Oct 2013 93,000 sq ft foodstore let to Tesco for 25 years with a breakin year 20 and fixed uplifts on review 1% & 3%

    Scottish WidowsInvestmentPartnership

    B&Q, Highfield Road,Craigavon

    RetailWarehouse

    11.90m 7.95% Oct 2013 86,620 sq ft open A1 retail warehouse let to B&Q for afurther 13 years

    Cordea Savills

    Law Society House,Belfast

    Office 4.25m 10.12% Oct 2013 49,913 sq ft office building. 65% of income secured againstGovernment Tenant

    Private Investor

    Springhill Retail Park,Bangor

    RetailWarehouse

    10.45m 9.30% Sept 2013 Open A1 retail park let to Next, New Look, Heatons,Starbucks, Poundstretcher and B&M Bargains

    Pradera/BrocktonCapital

    Invest NorthernIreland HQ, BedfordStreet, Belfast

    Office 17.00m N/A Aug 2013 130,000 sq ft office building. It is understood that NIGovernment acquired shares in holding company

    Northern IrelandGovernment

    Orritor Road RetailPark, Cookstown

    RetailWarehouse

    10.20m 9% Aug 2013 Open consent retail park. Tenants include Marks & Spencer,New Look, Next, Peacocks and B&M Bargains

    British AerospacePension Fund

    Clandeboye RetailPark, Bangor

    RetailWarehouse

    7.13m 15% May 2013 112,000 sq ft bulky good retail park let to Currys, PC World,Carpetright, Harveys and Halfords

    Threadneedle

    Sainsburys, LarneRoad Link, Ballymena

    Foodstore 17.85m 5.16% Jan 2013 60,777 sq ft. foodstore let to Sainsburys for 25 years withfixed uplifts 1% & 4%

    La Salle InvestmentManagement

    Tesco, Main Street,Limavady

    Foodstore 6.26m 5.83% Sept 2012 36,313 sq ft foodstore let to Tesco on a lease expiring in2031

    CBRE Investors

    Sainsburys, StrandRoad, Londonderry

    Foodstore 18.2m 5.71% June 2012 71,000 sq ft. foodstore let to Sainsburys for a further 12.5years

    La Salle InvestmentManagement

    B & Q, Faustina RetailPark, Londonderry

    RetailWarehouse

    17.4m 7.5% May 2012 102,000 sq ft. retail warehouse let to B & Q for a further 18years

    Metric PropertyInvestment Plc

    Tesco, Bentrim Road,Lisburn

    Foodstore 30.4m 4.97% Feb 2012 85,119 sq ft. Tesco Sale and Leaseback La Salle InvestmentManagement

    Overview

    Completed transactionvolumes hit 135 millionfor the year to date

    Trends

    Increased number ofinstitutional investors

    Yields improving

    Outlook

    Increased demand frominstitutional investors

    Turnover should top 150million for 2013

    3rd Quarter 2013

  • www.lisney.com

    Increased Institutional Investment for Retail

    W