Scale of slump in retail property rents highlighted
Retail property rents in Northern Ireland have fallen dramatically in the last three years due to the recession.
According to property consultants CB Richard Ellis, the rents have fallen because of a downturn in demand. Prime Zone A rents now stand at around £1,750 per sq metre, having peaked in 2006 at around £2,750 per sq metre.
Brian Lavery, head of the company's Belfast office, says there are also concerns over the amount of new office accommodation proposed to come on stream in the city in the next few years.
While cushioned to an extent by the large public sector, there has been limited letting activity in the city's office sector in recent months, fuelling fears of over-supply.
Mr Lavery added: “The summer months are generally very quiet in the Northern Ireland property market and this year has been no exception.
“The rate of unemployment has continued to increase in recent months and while considerably better positioned than the Republic, the Northern Ireland economy continues to deteriorate. As a result, demand in the key occupier markets remains weak and rents and capital values have come under pressure.”
He said that the retail market is facing many of the same pressures as in the Republic, although the grocery sector, particularly in the border towns, continues to perform well and Asda has recently announced plans to invest in upgrading its stores in Downpatrick and Dundonald.
Mr Lavery added: “The hotel and leisure market has been performing relatively well on the back of the Sterling/Euro differential and was boosted considerably by the recent Tall Ships Race event, which reportedly attracted as many as 800,000 spectators to Belfast.
“The tourism sector in the region will undoubtedly be further boosted by the completion of a number of signature tourism projects which are currently being developed.
“There have been a number of industrial land sales in the Belfast market in recent weeks on behalf of companies including Cemex, Tyco and Associated British Foods, which have established new benchmarks for land values in the region. While there has been no investment transactions concluded recently in Northern Ireland, several transactions are currently being negotiated and are expected to complete during the third quarter of 2009.
“The Richmond Shopping Centre in Londonderry has recently been placed on the market at a price which equates to an initial yield of 9.0%. Meanwhile, a number of First Trust branches in Newry, Bangor and Ballymena are being offered for sale, guiding an initial yield of 6.0%.
“These transactions will be a good gauge for yields and values during the autumn and will be watched closely.”