Occupier demand in retail sector at lowest since 2008 recession
Demand from occupiers dropped in the Northern Ireland commercial property market during the third quarter of 2019 with the retail sector suffering most according to the RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Commercial Market Survey.
The net balance for overall occupier demand in Northern Ireland was -11%, meaning that 11% more respondents said that occupier demand fell than those who said it rose.
Although demand for industrial space continues to increase (according to a net balance of +12% of respondents), the intensity of requirement is easing further after Q2 first saw Brexit-induced manufacturing stockpiling begin to fall back the report said.
In the retail sector, surveyors reported that occupier demand for retail space continued to drop at a significant rate, as prospects for the high street look progressively challenging.
The net balance of -61% for retail occupier demand is the lowest since 2008.
Things were brighter in the office sector, however, as demand for space continues to grow, albeit at a slower rate than at the beginning of the year.
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The report concluded that the outlook for the commercial property market appears subdued here. The expectation is that overall rents will fall; at sector level, surveyors anticipate industrial and retail rents to decline but that office rents will be flat.
Like many industries, political stalemate and Brexit have impacted negatively on the market.
Concerns were raised regarding the effects of Brexit on foreign investment too and relocation of EU and international firms.
Brian Henning, chair of RICS in Northern Ireland, said: "Overall, the findings reflect a subdued commercial property market in Northern Ireland for Q3.
"This is primarily due to an increasingly challenging environment for the retail sector, but in others may be due to the quarter having seen hesitation due to political uncertainty and anticipation of a potential no-deal Brexit.
"The fact that capital value expectations are still positive suggests a relatively soft landing for the commercial real estate sector is anticipated overall."
Gary Barr, relationship director of commercial real estate at Ulster Bank, added: "Some potential occupiers and investors appeared to be taking a wait-and-see approach during Q3 when there was considerable uncertainty in the wider economy. Deals are continuing to be done though by a range of buyers for good assets.
"Retail aside, when the political picture becomes clearer in the new year, occupier and investor demand in the office and industrial sectors may well start to recover."
Other findings in the research included details on the overall availability of commercial property, which has risen further into positive territory at a net balance of +39%.
Availability has increased across the board for office, industrial and retail at +41%, +12% and +65% respectively, according to findings.
And it said near term rent expectations took an overall downturn, falling from -1% to -33%.
For the office sector, they dropped from a net balance of +19% to a flat zero and industrial rents positive forecasts have gone from +10% to -24%.