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Demand for office space jumps despite working from home rise

Industrial property also sees increase but need for shops falls, according to report​​


Ulster Bank’s Gary Barr

Ulster Bank’s Gary Barr

Ulster Bank’s Gary Barr

Demand for industrial property here is continuing to grow, with the office market also showing signs of improvement, according to a report on commercial property today. 

But demand for shop space remains in the doldrums, and has fallen for the 14th quarter in a row, according to the market survey from the Royal Institution of Chartered Surveyors (RICS) and Ulster Bank.

Yet even as demand for retail space continues to drop, there were some signs of improvement, the survey found. The overall numbers reporting a fall in demand for retail space during quarter two had improved slightly on the first quarter of 2021.

Last week Belfast Telegraph revealed that Irish leisurewear retailer Gym+Coffee will soon be opening its first Northern Ireland store in Belfast’s Victoria Square Shopping Centre.

Industrial property was continuing to experience strong demand, with respondents to the survey reporting that requirements from occupiers were increasing.

And office occupier demand was at its strongest since December 2019, before the Covid-19 pandemic resulted in a mass emptying of office space.

As well as occupiers, there was growing demand for industrial and office space from potential investors, with the outlook for investment in offices the healthiest it had been since early 2020.

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The sale of the newly-built Merchant Square office in Belfast to a Middle East fund for £87m — the biggest ever deal for an office in Northern Ireland — was announced at the end of March this year.

And the professionals surveyed by RICS for the report said their expectations for the strength of industrial rents and capital values were still strong.

Demand for industrial space has increased following Brexit and the pandemic, with demand for warehouses increasing among retailers who are now carrying out more home deliveries.

Last week furniture firm EZ Living Interiors announced it was opening a new warehouse in Belfast’s Titanic Quarter.

But the outlook for rents and capital values for shops themselves was still gloomy, although the outlook had improved for capital values in the office market.

Gary Barr, relationship director of commercial real estate at Ulster Bank, said: “Unsurprisingly, demand for industrial space continues to be positive as some of the structural changes in the economy continue to happen.

"This continues to impact on the retail sector on the other end, but it is encouraging to note some improvements regarding office demand. And as more companies move back to some level of office working, this trend may well continue.”

Tarrant Parsons, RICS economist, said: “Confidence continues to recover across the commercial property market.

"Aided by the growth in online spending seen during the pandemic, demand remains robust throughout the industrial sector, producing strong expectations for both rents and capital values in the year to come.

"Although, on the other side of the equation, changes to work and lifestyle preferences continue to create challenges for the retail and office sectors, a more stable demand picture coming through across the latter over the second quarter just hints that trends may be starting to turn in a more favourable direction.”