Demand for office space increases as interest in retail property falls
Northern Ireland's commercial property sector is performing well despite Brexit uncertainty and demand for retail sites remaining in the doldrums, according to a survey today.
The report by the Royal Institution of Chartered Surveyors and Ulster Bank said inquiries from occupiers of commercial space had risen during the first three months of the year.
Demand for offices was particularly strong, with the number of respondents reporting rising demand from tenants at a four-year high.
However, requests for retail space fell for the fifth quarter in a row - bringing us into the second year of downturn for retail.
Problems for the retail sector were reflected in the amount of retail space available for let increasing for the fifth successive month - leaving vacant space at its highest level for more than four years.
Interest from potential investors in retail space was also down, though there had been growth in interest in office and industrial property.
Looking ahead, surveyors were confident about rents and capital values in the office and industrial sectors, but expected rents and values to fall.
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Brian Henning, chairman of RICS in Northern Ireland, said: "The office sector in particular appears to have withstood the most recent test of Brexit uncertainty, with surveyors remaining relatively positive about the sector despite external challenges.
"In contrast, the struggles of retail continue with rising availability and the weak outlook for rents a real concern for the sector and for town and city centres across Northern Ireland."
Gary Barr, relationship director at Ulster Bank, said shops were facing the effects of the same structural changes in retail - such as the growth of online shopping - as the rest of the UK.
He added: "The relatively strong performance in Northern Ireland of the office sector is, however, encouraging and reflects some of the positive announcements that we continue to hear about investment and expansion in sectors such as IT and business services."
The survey reported rising demand for commercial property space in general, with the strongest growth in demand for offices.
Demand for industrial space was also reported to have grown but retail demand was "firmly in negative territory", RICS said.
Retail was the driver of growing availability of space in the commercial property sector.
And members of RICS also reported a rise in new development during the first three months of the year, mainly from the building of offices. However, development starts in the retail sector were down.
Overall, investment inquiries had grown during the quarter, with the strongest increase in inquiries about investment in offices.
Surveyors were also expecting office and industrial rents to increase, with stronger growth anticipated for office rents.
Capital values for the office sector were also expected to rise strongly.
However, respondents were downbeat about the prospects for capital values in the retail sector to grow over the next three months.