north's commercial property market
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‘Outstanding’ final quarter for north’s commercial property market

A SPRINT finish final quarter saw commercial property investment volume in Northern Ireland complete at £215.1 million last year – 19 per cent above 2018 though 4 per cent below the ten-year average, according to new research from Lambert Smith Hampton.

Its Investment Transactions bulletin showed that despite an outstanding final quarter with volume of almost £91m, the uncertain local and national political climate continued to weigh on volume with 2019 annual volume the second lowest since 2013.

Retail retained its place as the dominant asset class in Northern Ireland, with £92.5m of transactions accounting for 43 per cent of volume in the year due to two large fourth quarter retail park transactions. Throughout the first three quarters of the year, the highest proportion of volume had been in the office sector with Belfast city centre office investments remaining the most in demand asset class.

Despite a challenging retail market, three retail parks transacted in the latter half of 2019. In the largest deal, Sprucefield retail park in Lisburn was bought by New River Retail for £40m (yield 8.71 per cent), Crescent Link retail park in Derry was purchased by David Samuel Properties for £30m (11.50 per cent yield) and Clandeboye retail park by Harry Corry Pension Fund for £8.7m (13.50 per cent yield).

Office transactions this year totalled £74.1m, the highest volume in the office sector on record, boosted by Citibank’s purchase of their Belfast headquarters, the Gateway Office in the Titanic Quarter, for £34m (5.48 per cent yield). Other notable office transactions included a local government department’s £16.0m purchase of James House at the Gasworks and Vanrath Recruitment’s £12.5m purchase of Victoria House.

2019 saw a number of office assets purchased by owner occupiers for a combined total of £62.8m, including the aforementioned Gateway Office, James House and Victoria House.

As usual, local investors were the most active investor type. By comparison to 2018, activity from this group was subdued with the number of transactions down 38 per cent and volume down 23 per cent. There were a number of higher value assets purchased by private investors including Antrim Business Park for £12.5m (14.5 per cent yield) and Timber Quay in Derry for £5.3m (11.5 per cent).

At £26.2m industrial volume was at its highest for the decade in 2019, with both propcos and private investors purchasing in this sector. In Armagh, 35 Moy Road was purchased by David Samuel Properties for £6.3m (7.28 per cent yield) and CD Group, Mallusk by Alterity Investments for £2.6m (7.23 per cent).

Martin McCloy, director of capital markets, Lambert Smith Hampton, said: “Q4 provided a strong finish to what was a difficult year for the investment market. The extension of the Brexit deadline, the lack of a Stormont executive and the prolonged uncertainty delayed investment decisions in 2019.

“Yet demand remained constant with potential investors in Northern Ireland particularly seeking secure long-term income or high quality office investments.

“While retail was again the dominant asset class by volume, this was as a result of a small number of large transactions rather than a signal of renewed attractiveness in what is still a challenging sector. Core assets remain attractive but pricing is key.”

He added: “It is anticipated that the ending of local political uncertainty and increased clarity on the Brexit process will boost investor confidence, translating into a substantial release of pent-up demand and a busier 2020.”

By Martin McCloy

Source: Irish News

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Commercial property investment surpasses £100m in 2019

COMMERCIAL property investment in the north has surpassed £100 million this year, according to a new industry report.

The latest data from Lisney reveals a better than expected last quarter, with the recorded £60m investment between April and June 9 per cent up on the same period in 2018.

The resilient performance brings the total value of transactions in the market for the first half of 2019 to £101m.

The largest deal completed in the second quarter was Citi’s purchase of its Belfast office in the Titanic Quarter for £34m, with other notable transactions, including the sale of Antrim Business Park of £12.5m and the £5.25m acquisition of Timber Quay in Derry.

A total of £45m worth of commercial property was on the market in the last quarter, including the Great Northern Tower and Boat in Belfast, along with Clandeboye Retail Park in Bangor.

PwC’s decision to acquire additional space and occupy the entirety of its new 155,000 sq ft Merchant Square Belfast headquarters pushed take-up within the sector to 75,171 sq ft in the three months to June. That being said the total is down on the previous year, while a shortage of Grade A office space within Belfast city centre continues to be a challenge for the market until new stock comes online later this year.

The struggling retail sector was boosted by Primark’s opening of a second city centre store at Fountain House on Donegall Place and the expansion of its Abbey Centre outlet. In relation to the industrial sector, the biggest letting of the year was a 113,550 sq ft site on the Lisdoart Road in Ballygawley.

Declan Flynn, managing director of Lisney Northern Ireland, said the local market continues to perform admirably in spite of the uncertain political climate

“We’re continuing to see healthy levels of local activity at a smaller lot sizes with pricing remaining resilient. That said the appetite of external investors is undoubtedly hampered in the current climate,” he said.

“This is understandable as the capital markets reflect the risk associated with Brexit. The retail sector continues to be a major talking point as the sector remains in the midst of a correction, given how our volumes have been traditionally dominated by retail this is a particularly pertinent for the Northern Ireland commercial property market.”

By Gareth McKeown

Source: Irish News

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Investor enthusiasm for UK commercial property slumps

Investor enthusiasm for commercial property in the UK has slumped further as sentiment swings towards France and Germany.

Only 27 per cent of international professional real estate investors said the UK is their preferred market, down four per cent in the last 12 months as Brexit uncertainty continues to weigh on investor sentiment.

Meanwhile support for the French market saw a 20 per cent year-on-year increase and appetite for German investments rose by seven per cent, according to the latest commercial property investment barometer by real estate platform Brickvest.

There was also a drop in the volume of assets under management that investors are planning to plough into real estate over the next year according to the quarterly survey of 6000 international professional investors.

Investors are planning to commit 2.5 per cent of their total AUM, a drop of 33 per cent on the planned amount of 3.7 per cent in the second quarter of last year.

Brickvest chief executive Emmanuel Lumineau said: “The latest figures of our Barometer reveal the continued negative effect of Brexit uncertainty on the UK commercial property market among international investors and particularly those based in France and Germany.

“We can expect this to continue over the third quarter and the October deadline at the very least.

“In the meantime, France and Germany are becoming more attractive destinations for international real estate capital.”

By Jess Clark

Source: City AM

UK economy Commercial property investment
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Commercial property investment falls as Brexit impasse continues

Commercial property investment across the Midlands has fallen as the ongoing Brexit impasse continues to have a negative impact on the market, a new report has revealed.

Lambert Smith Hampton’s (LSH) latest UK Investment Transactions(UKIT) report, says that at £10.9bn, Q1 investment volume across the UK dropped to its lowest quarterly total since the aftermath of the EU Referendum in Q3 2016.

Heightened investor caution in the weeks leading up the UK’s scheduled exit from the EU has clearly been reflected in investment activity. £10.9bn of assets changed hands in the quarter, 26% below average and a substantial 34% below Q4 2018, the largest recorded quarter-on-quarter percentage fall in five years.

Adam Ramshaw, LSH’s regional director for the Midlands, said that in Birmingham and the West Midlands a total of £313m of investment deals were completed in Q1, compared to £470m in Q4 2018. Compared to the same quarter last year there was a 33% drop in investments, with a 54% decrease on the figure for Q4 2018.

Across the East Midlands, there was investment of £197m in Q1, a year-on-year decrease of 67% and a 66% drop compared to Q4 2018, added Adam.

The national impasse was most clear with larger lot size deals. Q1 saw only 19 transactions in excess of £100m, the lowest number since Q4 2012 and significantly below the quarterly average of 31. That said, the total numberof recorded deals in Q1 was only 15% below average, indicating a stronger tolerance to current uncertainty across the wider market.

The market was in some respects turned upside down in Q1. For the first time on record, the three traditional core sectors accounted for less than half of volume. Offices took the brunt of the drop-off in Q1, with volume at a ten-year low of £2.7bn, down a substantial 60% quarter-on-quarter and reflecting a moribund period for large-lot size deals in Central London.

Meanwhile, a perfect storm of structural change and Brexit uncertainty saw retail volume sink to its lowest quarterly total on record, at just over £1bn. Industrial volume dropped to £1.4bn in Q1, far removed from the record £2.2bn in Q4 2018 but only 18% below the trend.

Other sectors proved notably more resilient. Hotel & leisure volume of £2.6bn in Q1 was its strongest quarter in 13 years, boosted by a number of portfolio deals and the UK’s largest deal in Q1, Queensgate Investments’ £1.0bn acquisition of the Grange Hotel Portfolio. Collectively, the specialist sectors also bucked the trend in Q1, with volume of £2.7bn being 35% above average and fuelled by twelve Build to Rent forward funding deals.

The heightened caution in the UK market in Q1 was evident across each of the main investor groupings. Quoted property companies were the least acquisitive buyers compared with trend, with volume of £680m at below half the average, followed by UK institutions where volume of £2.0bn was 35% below average. While investment from overseas investors was also subdued by recent standards, tellingly, they remained major net buyers of UK property, to the tune of £3.3bn in Q1.

The All Property average transaction yield moved out by 14 bps in Q1 to stand at 5.48%. While all the main sectors moved out, retail saw the largest outward movement of 68bps to stand at an average of 6.21%.

Ezra Nahome, CEO of Lambert Smith Hampton, said: “Q1 turned out much as we expected, with investors of all persuasions opting to take a backseat in the crucial run-up to the UK’s scheduled EU exit date. For the first time ever, the so-called alternative sectors collectively accounted for well over half of total volume, a telling reflection of the direction of travel in the market and the insatiable demand for long-income deals.

“While many will be relieved the UK avoided a no deal Brexit outcome, frustratingly, the EU’s extension to later in the year will only act to preserve uncertainty in the market. Despite the generally sound fundamentals of UK real estate investment, this is likely to prove detrimental to the rebound in volume we had been expecting for the latter part of 2019.”

By Rachel Covill

Source: The Business Desk

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Commercial property investment in the north falls to five-year low

COMMERCIAL property investment in the north fell to its lowest level since 2013 last year, according to a new industry report.

The latest Lambert Smith Hampton bulletin shows that the £176.6 million investment volume recorded in 2018 was 48 per cent lower than the previous year and 12 per cent down on the 10-year average.

After a slow start to the year, the quarterly activity exceeded £50m for the remainder of 2018, boosted by the beleaguered retail sector.

Retail transactions accounted for almost half of the activity in 2018, with notable deals including the Belfast sale of 40-46 Donegall Place for £16.4m, the acquisition of Bow Street Mall in Lisburn for £12.3m and the purchase of the Newtownards-based Castlebawn Retail Park for £7.2m.

Office activity also picked up in the second half of the year, largely driven by two Belfast deals – the sale of the Metro Building for £21.8m and the £15.2m purchase of Obel 68.

There was further positivity noted within the alternative sector, with car parks, car showrooms, gyms and hotels among the assets that changed hands in 2018.

Private Northern Ireland investors remain the most active and accounted for a third of investment volume last year, while institutional activity increased from 11 percent of volume in 2017 to 21 percent last year.

Notable institutional transactions included CBRE Global Investors £18.4m purchase of the NCP Car Park on Montgomery Street in Belfast and Corum Asset Management’s purchase of 40-46 Donegall Place.

Martin McCloy, director of capital markets at Lambert Smith Hampton, admitted that the ongoing political uncertainty has impacted on the local market.

“ The challenging political environment has undoubtedly had a negative effect on investment activity over the past two years, with 2017 boosted by the £123m sale of CastleCourt Shopping Centre,” he said.

“While overall the market has demonstrated a level of resilience, there is a lack of supply of good quality assets and investor caution is evident.”

Looking at the year ahead, Mr McCloy said the trend of a quiet first quarter is likely to be exacerbated by the upcoming March 29 Brexit deadline.

“Both buyers and sellers are delaying decisions until there is clarity on the withdrawal agreement or on no agreement, as the case may be.”

“Investment activity is expected to pick up when the terms of the future relationship are clearer and the transition period begins,” he added.

Source: Irish News

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Commercial property investment ‘subdued’ in third quarter says report

COMMERCIAL property investment in the third quarter of 2018 remained ‘subdued’ in Northern Ireland, with volume recorded at £53.2m, according to Lambert Smith Hampton’s latest regional investment transactions report.

The ITNI Bulletin reports that year-to-date total investment volume stands at £121m, a decrease of 52 percent on the same period in 2017.

And while investor appetite has improved, Q3 activity overall remained low at 38 percent below the five-year quarterly average.

On the upside, the latest quarter did see the first office investments of 2018.

With a combined value of £39.4m, three assets changed hands in Belfast city centre, accounting for 74 percent of the quarterly volume.

These included the Metro Building for £21.8m (a yield of 5.75 per cent), Obel 68 for £15.2m (yield 6.73 per cent) and 20 Adelaide Street for £2.4m (yield 7.2 per cent).

The two largest deals of the quarter were by a local property company and Belfast Harbour Commissioners.

Private Northern Irish investors were very active, and this group is responsible for the largest proportion of investment volume in the year-to-date.

Martin McCloy, director of capital markets at Lambert Smith Hampton, said: “Although subdued in comparison to recent years, investment has remained resilient in the face of the political and economic headwinds of the last two years.

“We anticipate that quarter four will follow the same trend as the two previous quarters, with £20m of deals currently agreed or in legals.

“Investor appetite remains and investors are taking advantage where clear value can be found with quality assets quickly being agreed.”

He added: “The uncertainty continues regarding the exact detail of the withdrawal and future relationship agreements between the UK and EU.

“A blueprint for the future trade and security partnership should further increase confidence amongst investors and the commercial property market.”

Source: Irish News