Confidence in Northern Ireland commercial property slumps as Brexit vote uncertainty takes hold
The Brexit vote has hit confidence in the Northern Ireland commercial property sector with some investors jittery about the implications of the EU referendum result.
Leading agent CBRE said uncertainty about the outcome of the vote caused some areas of the market to "stall" in the first half of this year, when sales of major developments dropped by more than a quarter.
And last Friday's shock result is likely to delay further property deals with some companies holding off from activity until there is a clearer political and economic landscape.
"Until there is clarification on the ramifications of the Brexit vote, developers of new schemes of all types are anticipated to proceed with caution and an eye on how our politicians work together to regain market confidence in a changed landscape," said Brian Lavery, managing director of CBRE.
The company recorded 10 investment transactions totalling £70m in the second quarter of 2016, bringing the half year total to £103m in 15 transactions. That was down nearly 27% on the same period last year.
"While some decisions have been put on hold in the short-term, we feel that other properties due to be brought to the market will proceed regardless in the second half of 2016, with currently £75m worth of sales to be launched," said Mr Lavery.
However the CBRE report noted that activity in the commercial property market in Northern Ireland was heavily skewed towards the second half of the year, with the largest proportion of leasing, sales and investment activity generally occurring then.
"It remains to be seen if this will be the case in the second half of 2016, or to what extent the uncertainty created by the Brexit vote will stymie any investment activity over the coming months," said the report.
The CBRE revealed a positive picture of the Belfast office market between January and June, with 235,000 sq ft of lettings, an almost threefold increase on the same period last year.
Prime rents averaged out at around £17.50 per sq ft, and this is expected to rise to £18 by the end of the year.
But Britain's vote to leave the EU poses a threat to some of the deals that are in the pipeline. "There are currently approximately 750,000 sq ft of active requirements for office accommodation," said Mr Lavery.
"It is unclear whether all of these will remain active in the face of the Brexit decision, and some occupiers will require reassurance about the corporation tax reduction in 2018."
While the Brexit vote has raised fears of a longer-term negative impact on parts of the commercial property market, there is an immediate benefit for some.
"Currency movements as a result of Brexit could see a unique buying opportunity emerge," said Mr Lavery.
"The uncertainty created could keep interest rates lower for longer, which bodes well for investment in real estate."
The CBRE reports added that the drop in the value of sterling since the referendum result could also lead to a surge in cross-border shoppers, benefiting border towns and Belfast.
The number of investment transactions recorded by CBRE that totalled £70m in the second quarter of the year, bringing the second half-year total to £103m