The local property sector is facing another challenging year and it will likely be 2011 before the market improves to any noticeable degree.
That is the cautious forecast by property consultancy CB Richard Ellis (CBRE) in its annual outlook report.
The Dublin and Belfast-based firm said that while 2009 ‘marked the low point’ for commercial property in Northern Ireland and the Republic, it is premature to expect a rebound in 2010.
According to the report a combination of a lack of bank funding and sharp declines in the value of the end product led to land values in Northern Ireland declining by as much as 60% from their peak. Despite the drop in values however, it notes there were very few land transactions last year.
CBRE found that the office sector had seen the most marked decline in take-up of properties due to the dominance of the public sector, which signed very little additional accomodation last year.
There were only 15,000 square metres of office lettings transacted in Belfast in 2009, it said.
“Considering Government cutbacks in public spending and with no current signs of significant inward investment for the foreseeable future, it remains to be seen if there will be any significant improvement in letting activity in the region in 2010,” the report said.
CBRE also said that in addition to new offices being finished, a number of corporate occupiers are downsizing operations and releasing more office space onto the market to re-let, putting rental values under pressure.
It believes prime office rents in Belfast are now at around £130 a square metre.
While retailers such as Poundland, Primark and Sainsbury’s continue to expand, it tips any entrants to the market in 2010 to gravitate towards the retail parks with larger units and cheaper rents than high streets.
CBRE also concluded that the hotel sector in Northern Ireland is now saturated and said that other than new hotels planned for George Best Belfast City Airport and the Titanic Quarter, there is ‘little prospect’ of any other new developments in the Belfast market for the foreseeable future.
However, the firm believes prospects for the investment market are more positive, with more stable yields likely to encourange investors to consider the region this year.
Brian Lavery, managing director of CB Richard Ellis in Belfast said: “While 2010 will be difficult, we expect that conditions will stabilise.
“There will be opportunities to purchase good quality assets and land parcels in Northern Ireland at very attractive prices over the course of the next 12 months.”