Why we must start to build on success of Belfast being top in UK's office market
The office market in Belfast has been a pertinent topic of some discussion in recent years - from the shortage of supply to the quality of space that modern companies require.
We know that the office sector is crucial to our economy; helping attract investors, providing space for entrepreneurial businesses to grow and helping bring people and vibrancy into our city centre.
But until recently, we didn't really have any empirical evidence on what returns the office and wider commercial property market in Belfast and in Northern Ireland has delivered for investors and how this compared to other UK and European cities.
The Northern Ireland Commercial Property Investment Review 2018, produced by Ulster University and global financial company MSCI in collaboration with RICS, does just that.
Encouragingly, it shows the Belfast office market was the top performing UK office market in terms of investor returns in 2018, significantly outstripping cities such as Manchester, Liverpool, Glasgow, Cardiff and London, a new property report has found.
The review found that the Belfast office sector delivered total returns of 12.4%, well above the UK average (6%) and the European average (8%).
It also reported that Northern Ireland produced an income return for investors of 7.0%, exceeding other UK regions and reaching a higher rate than the MSCI Europe Annual Property Index.
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This is the third year that the Belfast office market has exhibited out-performance relative to comparator UK cities with results underpinned by rental value growth and strong income profiles.
The welcomed growth in the office market reflects the new investment dynamic in the city region and heightened expectations of occupiers coming into the market. The modern generation of IT and professional services occupiers have identified Belfast as a progressive, go-to and contemporary location offering access to workforce skills and investment opportunities comparable with and exceeding other European locations.
The relative under-supply of institutional grade office space allied with a strong pipeline of prospective new tenants bodes well for the Belfast office market moving forward and should serve as encouragement to developers and financers to mobilise development pipelines. While the office market performed strongly, results for the retail sector which dominates the institutional investment landscape in Northern Ireland, was less positive.
The Belfast retail sector delivered a negative total return (-1.6%) that was marginally better than the UK retail sector average (-1.7%).
There is no doubt that the overall performance of institutional investment in Northern Ireland has been adversely impacted by the high levels of exposure to the retail sector. Conventional retail provision continues to undergo a turbulent process of realignment.
However, Belfast is not unique in the challenges that it faces from the demise within the retail sector, with cities needing to appreciate and comprehend the structural shift and implications within the commercial property investment landscape.
Going forward, cities will need to become more creative in terms of how they attract and collaborate with investors to ensure that future development pipelines offer a mix of property uses which contribute to the social and economic growth of the city and city region.
In the meantime, we should promote our superior income return relative to other markets across Europe, as Northern Ireland continues to be an attractively priced investment destination.
- Martin Haran is Professor of Real Estate and Urban Studies at UU and a member of the Royal Institution of Chartered Surveyors (RICS)