Your Property. Our Business.

QUARTERONE2016

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CONTENTS

Int roduct ion03

Table of contents

Investment04

Notable Investment Transact ions07

Current ly On The Market07

Off ice08

Notable Off ice Take-Up09

Retai l10

Industr ia l12

The Team Behind The Research14

INTRODUCTION

Quarter 1 2016

Investment t ransact ions and Cerberus

sel l ing out thei r loan book have dr iven the

market in the f i rst Quarter of 2016.

Cerberus have been part icular ly act ive in

this period agreeing the 15 acre Sirocco

Site opposite the Waterfront hall, the Castlebawn

development s i te in Newtownards, the

long awaited Royal Exchange development

s i te in Bel fast c i ty Centre and a number

of s igni f icant res ident ia l s i tes in North

Down and Londonderry.

Cerberus have been

particularly active in this period selling

the 15 acre Sirocco Site

3

Lisney’s Q4 update reported an opt imist ic

out look for the NI investment market in

2016 with susta ined t ransact ion volumes

dr iven by increasing investor sent iment

and th is has come to f ru i t ion in the f i rst

Quarter of 2016.

A number of s igni f icant t ransact ions

have led to investment volumes reaching

£120m, with a fur ther £140m current ly on

the market inc luding Cit i Group’s Bel fast

HQ in Gateway Off ices, Damol ly Reta i l

Park and the Br i t ish Land Port fo l io , made

up of L isnagelv in SC, Rivers ide Reta i l

Park and Tesco Craigavon.

Brexit Looms

INVESTMENT

Q1 2016

STRONG TRANSACTION

VOLUMES

SUSTAINED DEMAND

BREXIT MAY STALL Q2

INVESTMENT ACTIVITY

DECLAN FLYNN,

MD, LISNEY NI

Declan Flynn joined Lisney in 1992 and was appo in ted Managing Director in 2002.

He is a Member of the RICS and has over 20 years commercia l property exper ience.

Fol lowing h is appointment as Managing Director he expanded the business most notably in the area of asset management across the UK.

Declan is involved in a l l aspects of the businessfocusing pr imar i ly onbusiness development .

The most significant new entrant to our market has been Tristan Capital

5

1.9%2016

IMF FORECAST FOR UK GROWTH

Cut f rom prev iously forecast

f igure of 2.2%

3.2%2016

IMF FORECAST FOR GLOBAL GROWTH

Cut f rom prev iously forecast

f igure of 3.4%

INVESTMENT

Q1 2016

Although Q1 investment volumes have

remained strong, we expect the number

of investment t ransact ions to decl ine in

Q2 before recover ing towards the end

of the year .

The focus for the next few months wi l l

be on “BREXIT” and the EU referendum

and we expect that most investors wi l l

take stock and await the outcome of

both votes and local e lect ions before

making fur ther investment decis ions.

Research from Oxford Economics indicates

that the NI economy may be more

vulnerable to the type of st ructura l

changes which a UK ex i t f rom the EU

would encompass, compared to the rest

of the UK and i t remains to be seen what

impact th is will have on levels of Foreign

Direct Investment.

As a consequence of the ongoing

economic uncerta inty, the Internat ional

Monetary Fund has cut i ts forecast for

UK growth th is year to 1.9%, f rom the

2.2% i t forecast prev iously.

In a s imi lar instance, the IMF’s forecast

for g lobal growth was cut to 3.2% from

3.4%. This suggests that a Brex i t could

have severe impl icat ions not only

regional ly, but a lso on a global scale .

On a more posi t ive note, UK inf lat ion h i t

i ts h ighest rate in 15 months in March,

wi th the Consumer Pr ice Index r is ing by

0.5% and core inf lat ion to 1.5%.

With th is in mind, a preferable outcome

to the EU Referendum buoyed by a

strengthening UK market may have some

posi t ive connotat ions for Northern

I re land moving forward.

INCOME SECTOR £M NIY/£PSF* PURCHASER

The Outlet & Junction One Open Retail Park 32.0 9.0% The Lotus Group With

Tristan Capital

Bloomfield Shopping Centre Shopping Centre 54.15 7.66% Ellandi & Tristan Capital

Capital House. Office 11.0 8.1% Melcorpo

Donegall Square North Office 5.95 £218 PSF Private Investor

River House Office 7.0 £80 PSF Mercer Real Estate

Oxford House & Gloucester House Office 7.75 9.5% Wirefox

NOTABLE INVESTMENTTRANSACTIONS

Q1 2016

CURRENTLY ON THE MARKET

Q1 2016

*Where NIY is unavailable for vacant property £PSF has been provided.

PROPERTY SECTOR ASKINGPRICE £M

STATUSNIY

Lisnagelvin Shopping Centre Shopping Centre 17.2 Under Offer6.9%

Damolly Retail Park Part Open Retail Park 33.5 Agreed6.89%

Downe Retail Park Open Retail Park 17.0 Available6.75%

Gateway Offices Office 29.0 Under Offer6.5%

Shaftesbury Square & Bow Street Office/High Street 9.1 Sale Agreed5.8%

Riverside Shopping Centre Shopping Centre 14.32 Available6.78%

7

The tone of the NI of f ice market in 2015

was restr icted supply of Grade A stock

result ing in an inabi l i ty to service demand

and th is has been compounded fur ther

in the f i rst Quarter of 2016.

Take up of of f ice space reached ci rca

160,00sq f t . in Q1, the major i ty of which

was made up of refurbished ex ist ing

OFFICE

Q1 2016

FURTHER DECREASE

IN SUPPLY

SUSTAINED DEMAND

STRONG

REDEVELOPMENT

PIPELINE

Take up has reached c.160,000 sq ft in Q1 2016

8

This will put further pressure on rents which have been risingspace, rather than new bui lds and in the

absence of new developments coming to

the market , the gap between demand and

supply wi l l undoubtedly lengthen.

We are aware of a number of active requirements

which the current supply cannot fu l f i l ,

notably that of HMRC which is seeking

100,000 sq f t . of Grade A space.

This wi l l put fur ther pressure on rents

which have been steadi ly r is ing s ince

2014, a notable example of where rents

have gott to is the Ki lmona regear of the

Allstate lease in Lanyon place at a headline

f igure of £20 per sq f t .

As a resul t of the lack of supply we are

also seeing more landlord fr iendly lease

terms with incentive packages lessening

and the gap between headl ine and net

ef fect ive rents t ightening.

Al though current supply is l imi ted, the

out look for the medium term is relat ively

posi t ive wi th developers focussing on

redevelopment/refurbishment projects

in an at tempt to del iver much needed

new space.

Ki lmona Holdings and Mc Aleer & Rushe

are set to be act ive in th is space with

p lanning permission appl ied for on a

number of c i ty Centre Si tes.

OCCUPIER SIZE (SQ FT) LOCATION

DSD 22,727 Cleaver House, Donegall Square North, Belfast

Belfast Telegraph 17,506 Clarendon Dock, Belfast

Navi Net 15,500 Northern Ireland Science Park, Belfast

NBC Universal T/A BRS Golf 10,173 City Quays, Belfast

NIE 10,000 Old Channel Road, Belfast

NOTABLE OFFICE TAKE-UP

Q1 2016

Liberty IT 26,000 Adelaide Exchange, Adelaide Street, Belfast

9

Demand cont inues to be strong for

pr ime City Centre reta i l p i tches as

ev idenced recent ly by L i festy le Sports

leasing c. 8,000 sq f t . of space in

Victor ia Square SC which was

prev iously occupied by Bank Fashion.

We are a lso aware of a number of

other occupiers wi th e i ther act ive

requirements or deals current ly in

legals .

RETAIL

Q1 2016

PRIME CITY CENTRE

PERFORMING STRONGLY

VACANCY RATES

DECLINING FURTHER

ZONE A RENTS

TRENDING UPWARDS

TOWARDS £150 PSF

Prime rents on Donegall Place are trending uptowards£150 psf

10

With vacancy rates declining, we expect

pr ime rents to cont inue t rending

upwards and Zone A to reach £150

per sq f t on Donegal Place.

This in turn may have a posi t ive impact

on secondary locat ions as reta i lers

look towards the per iphery of the City

Centre in search of sui table space.

As a resul t of Tr istan Capita l ’s recent

spending spree and thei r act ive asset

management we are aware of a number

of ongoing deals wi th in thei r schemes

to UK retai lers

Moving forward we expect pr ime locat ions

to carry on performing strongly wi th

secondary p i tches benef i t t ing as a resul t

and regional towns to cont inue thei r s low

rev iva l .

Prime rents on Donegall Place are trending uptowards£150 psf

11

LIMITED SUPPLY

SUSTAINED DEMAND

UPWARDS PRESSURE

ON RENTS TOWARDS

FEASIBLE DEVELOPMENT

LEVELS

Low levels of t ransact ional act iv i ty in 2015 have

continued into Q1 of 2016 and this is being

driven on the supply side by the lack of availabil ity

space, part icular ly over 50,000sq f t

On the demand s ide low oi l and commodity

pr ices are causing a weakness in demand f rom

manufacturers .

The net resul t of both means very few

transact ions of note complet ing in the f i rst

Quarter of 2016

With weak demand current ly outstr ipping l imi ted

supply, many operators are undertaking design and

build projects in order to meet their requirements.

INDUSTRIAL

Q1 2016

Low oil and commodityprices are causing a weakness in demand

12

This is ev idenced by aerospace

manufacturer RLC expanding its operation

to the Langford Lodge s i te in Cruml in ,

a £35m project which is being back by

Invest NI to the tune of £6.5m.

In addi t ion to RLC and despi te recent

developments with firms such as Bombardier,

there is a strong appetite from companies

operat ing in the aerospace industry for

good qual i ty space and we expect th is

t rend to cont inue.

In the short term, the trend of decreasing

avai labi l i ty is l ike ly to cont inue with few

opportuni t ies becoming avai lable .

In the medium to long term, we expect

pressure on renta l va lues to cont inue

pushing them towards viable speculative

development levels of £5 per sq f t .

making f inance more readi ly avai lable .

THE TEAM

Behind the research

NICKY FINNIESTON

Director(Retai l & Investment)

STEPHEN CHAMBERS

Associate Director( Investment & Finance)

ANDREW GAWLEY

Associate Director(Agency)

DECLAN FLYNN

Managing Director

AOIFE BRENNAN

Divis ional Director(Research Div is ion)

TANYA DUFFY

Property Researcher(Research Div is ion)

14

Your Property. Our Business.

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29-33 Montgomery Street, Belfast, BT1 4NX

028 9050 1501

info@lisney-belfast.com

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