Retail 10.2% - belfast.lisney.com · Annual Ofﬁce Take Up 2013 -2018 2013 2014 2018 Square Feet...

Q4Quarter 4, 2018

THELISNEYBELFASTCOMMERCIALPROPERTYREPORT

The Difference

The Market in Numbers

£165 million of investment transactions during 2018

Investment

£165m

Annual take up throughout Belfast City Centre in 2018

Office

885ksq ft

Belfast prime retail vacancy up 1.0% to 10.2%

Retail

Annual take in 2018

Industrial

2m+sq ft

10.2%

& 2019 OUTLOOK

Prime Retail Vacancy

After a resilient summer, dominated by high profile office investment quarter 4 saw £100m+ of new product come to market, much of which was focused on the office sector with vendors buoyed by a strong performance over the preceding months.

Investment

Overview

Activity

Property Sector Value

Metro Building, Donegall Square South, Belfast Office £21.80

Next and Easons, Donegall Place, Belfast Retail £16.40

Obel 68, Donegall Quay, Belfast Office £15.20

Bow Street Mall, Lisburn Shopping Centre £12.25

Castlebawn Retail Park, Newtownards Retail Park £8.5m

Notable Transactions Throughout 2018

Investment Volumes, Q4 2017 - Q4 2018

Q12018

Q42017

Q22018

Mill

ion

£ (S

terl

ing)

Q32018

20m

40m

60m

80m

100m

120m

140m

80m

10m

55m

70m

Q42018

30m

The Lisney Northern Ireland Commercial Property Report Q4 2018 & 2019 Outlook

Q4 Volumes were down significantly to £30m with the largest transaction of the quarter being the sale of Bow Street Mall in Lisburn to a private Irish investor for £12.25. These transactions bring our annual volumes to £165m which is down from the £305m traded in 2017.

However if we take out the single largest transaction of 2017, being the £123m sale of Castlecourt then the drop is much less pronounced, though still down on our 5 year average of £300m which is unsurprising in the current macro environment. NI investment volumes are traditionally dominated by retail and the sector, as a result, has been particularly hit by cost price inflation and tenant defaults over the last 12 months. Northern Ireland therefore, like the rest of the UK, has seen investment volumes and investor appetite drop off, especially outside of prime pitches. Metro Building, Donegall Square South, Belfast

Investment Volumes, 2014 - 2018

20152014 2016

Mill

ion

£ (S

terl

ing)

2017

500m

200m

300m

400m 305m

100m

400m

2018

420m

213m

305m

165m


Investment

Where we can point to positivity is the office sector, Lisney’s sales of both the Obel 68 and the Metro Building saw some of the strongest pricing ever achieved locally with a depth of local, national and international demand, demonstrating liquidity for good quality, appropriately priced product.

The importance of pricing continues to be a theme with investors, our key local “USP” is maintaining a discount or “yield gap” between NI and the rest of the UK, where vendors are cognisant of this, there is undoubtedly demand.

2019Outlook

Office

The office market has continued in record breaking fashion with take up now approaching 885,000 sq ft as the year draws to a close. To put this into context the 5 year average take-up is approximately 460,000 sq ft, emphasising the strength of demand and perhaps deflating the impression that ‘Brexit’ is causing uncertainty amongst office occupiers and the business community.

The trend of Tech and Digital domination continues to be a real positive for the Belfast market whilst ‘co-working’ space operators have also been active. Wework’s global rise in that particular sector has been rapid, with many landlords and investors waiting to see if there is a potential structural shift within the general office market, many of whom will

Overview

look south and note that there has been a 93% increase in ‘co-working’ space take up in Dublin over the past 18 months.

The most notable letting of the quarter was to PWC, as media reports have indicated that the deal will make them the anchor tenant in the Merchant Square development. Currently based in Waterfront Plaza, PWC’s existing 2,000 staff will relocate to Merchant Square in the summer of 2020. When the development is completed it will include 200,000 sq ft of grade A office accommodation across nine floors, with space for more than 3,000 people – the scheme is being developed by Oakland Holdings. PWC confirmed that future plans for further investment and job creation meant that it was running out of space in its current Belfast headquarters.

Obel 68, Donegall Quay, Belfast

Proposed development at The ‘Sixth’

Activity

Office

100k

200k

300k

400k

500k

800k

600k

700k

1m

900k

Annual Office Take Up 2013 -2018

2013 20182014

Squa

re F

eet

2015

400k

348k

209k

535k

2016

326k

2017

885k


Landlord Tenant Size (sq ft) Location

Oakland PWC 155,012 3rd - 9th Floor, Merchant Square, Wellington Place

Straben BESpoke 19,774 Ground & 1st Floors, Adelaide Exchange, Adelaide Street

Castleforge TLT 11,630 12th & 13th Floor, River House, High Street

Killultagh Allen & Overy 9,500 5th Floor, The Linenhall, 32-38 Linenhall Street

Angus Properties Teamwork 8,870 1st, 2nd and 3rd Floors Laganview House

Causeway Asset Management StepSpace 5,591 1st Floor, Centre House, Chichester Street

Private Landlord CYTI 3,415 4th Floor, Moneda House, Wellington Place

Private Landlord Firemelon 3,326 5th Floor, Moneda House, Wellington Place

Private Landlord Fintru 3,100 3rd Floor, 74/76 Dublin Road

Notable Office Transactions, Q4 2018

A continuing trend within the Belfast office is a lack of supply, with no ‘new’ stock scheduled to be available to occupy through the remainder of 2018. We do however expect to see supply levels grow in the foreseeable future with the arrival of a number of refurbished buildings including Chichester House (48,000 sq ft).

There have been significant letting at River House with both TLT and Clockwise taking space with other new occupiers to be confirmed.

A significant mixed use scheme has also been launched by Castlebrooke Investments ‘Tribeca’ a 12-acre site beside St Anne’s Cathedral and bordering Royal Avenue, Donegall Street, Lower Garfield Street and Rosemary Street, the proposed scheme will include 1,500,000 sq ft of residential and office space as well as a retail and hospitality element– significantly the first phase of Tribeca will be two Grade A office buildings extending to 180,000 sq ft.

As a continued word of caution, we foresee supply constraints of larger buildings, especially in floor plates in excess of 20,000 sq ft. This emphasizes a strong reliance on schemes such as the ‘Sixth’ (former Belfast Telegraph building) City Quays 3, Bedford Square, Waterside, Bankmore Square being delivered to facilitate any companies who seek to expand within Northern Ireland within the next 12 to 24 months.

Headline Rents

11.0012.0013.0014.0015.0016.0017.0018.0019.0020.0021.0022.0023.00

Rent

£/P

SF

2013

2014

2015

2016

2017

2018

2019

Headline Rents, 2013-2019

2020

2019Outlook

Retail

After months of disruption following the Primark fire, Belfast saw bumper footfall in December.

Five Guys had new openings in Q4 2018


Overview

Despite very difficult headwinds in the sector as a whole, Belfast and Northern Ireland’s high streets and shopping centres have remained relatively resilient throughout 2018. Continued occupier demand has seen vacancy rates for the province as a whole (prime, secondary and out of town) improving from 16.6% in 2017 to 15.1% in 2018. Prime occupancy rates improved from 13% to 12.8% despite Belfast’s prime core falling back slightly to 10.2% from 9.1% in 2017. After months of disruption following the Primark fire, Belfast saw bumper footfall in December with reports of in excess of 20% increase on 2017.

More than 3 months on from the Primark fire that shut down a large part of our prime high street, early December saw the new temporary walkway in place, reopening the key access routes between Donegall Place, Royal Avenue and Castle Place. This brought about the reopening of McDonald’s, Spar, Argento, and Skechers. Also, in the following week we saw the welcome return of Primark in Commonwealth House, the original extension to Bank Buildings.

In Belfast, Irish department store Guineys opened on Castle Place, Matalan opened its first town centre store in NI at CastleCourt and Mike Ashley’s Brand Max made its NI debut with their opening in Connswater . These lettings combined brought approximately 60,000 sq ft of vacant space back to life!

Activity

Despite a number of high profile CVAs our out of town locations are experiencing continued demand from retailers including M&S, B&M, Iceland, TK Maxx, Dunelm, EZ Living, Pets at Home and Poundstretcher, so we expect to see stores vacated by Toys R Us, Maplin, Carpetright, Mothercare etc relet throughout 2019. Noteable openings in Q4 saw M&S Simply Food and O’Neills open at the redeveloped Marlborough Retail Park, Craigavon and Pets at Home’s new store at Bloomfield Retail Park in Bangor.

The food and beverage sector continued to be buoyant, with openings including Five Guys at Boucher Square and alongside Nandos at Rushmere Shopping Centre in Craigavon. Tim Horton and Subway opened new drive thru units at Connswater and Boucher Road and Starbucks opened on Wellington Place in Belfast.

Retail

2019 will undoubtedly see further turmoil in the sector with the perfect storm of online competition, political and economic uncertainty, reducing discretionary spending and squeezed margins leading to more business failure and CVAs. However as we have seen throughout 2018 there is a pool of active retailers pursuing opportunities where landlords are prepared to be realistic on rents and incentive packages.

Trader Type Location Town/City Area (sq ft)

Matalan Shopping Centre Castlecourt Shopping Centre Belfast 24,000

Brand Max Shopping Centre Connswater Shopping Centre Belfast 22,000

Guineys High Street Castle Place Belfast 21,700

Airtastic Out of Town Marlborough Retail Park Craigavon 16,000

O’Neills Out of Town Marlborough Retail Park Craigavon 14,000

Pets at Home Out of Town Bloomfield Shopping Centre Bangor 10,000

Bargain Buys Shopping Centre Richmond Centre Londonderry 8,300

M&S Simply Food Out of Town Marlborough Retail Park Craigavon 7,000

Savers Shopping Centre Connswater Shopping Centre Belfast 5,000

McDonald’s Food & Beverage The Junction Belfast 4,700

Sports Direct Shopping Centre Connswater Shopping Centre Belfast 4,500

Guess Out of Town The Boulevard Banbridge 3,735

Nandos Food & Beverage Rushmere Shopping Centre Craigavon 3,571

Tim Hortons Food & Beverage Connswater Shopping Centre Belfast 3,305

Five Guys Food & Beverage Rushmere Shopping Centre Craigavon 3,171

Starbucks Food & Beverage Wellington Place Belfast 2,500

Subway Food & Beverage Boucher Road Belfast 2,000

Tommy Hilfiger Shopping Centre Tower Centre Ballymena 1,476

Jack Wills Out of Town The Boulevard Banbridge 1,456

Tribal Burger Food & Beverage Callender Street Belfast 1,400

Taboo Food & Beverage Tower Centre Ballymena 1,300

Notable Transactions, Q4 2018


Prime Retail Vacancy, 2012 - 2018

Belfast NI UK

2012

2013

2014

2015

2016

2017

2018

2.004.006.008.0010.0012.0014.0016.0018.0020.00

Vaca

ncy

%

12.8%

10.2%

9.2%

2019Outlook

Industrial

Overview

Where Quarter 3 saw a raft of large lettings and very few sales, Quarter 4 has had a number of large sales completing giving a more even spread to the market.

A large proportion of the live industrial requirements are driven by the retail sector for nationwide distribution.

This is a similar trend to that seen in the rest of the UK where 46% of all logistics take-up relates to retailers. Online retailers such as Amazon, who took another large building in Channel Commercial Park, Belfast last quarter, are seeking distribution facilities to help support growing demand for Ecommerce. These companies aspire to be as close to ‘Chimney Pots’ as possible to enable high speed delivery to their customers.

Ballyronan Road, Magherafelt

Activity

The largest transaction of the quarter involved the sale of an industrial facility on Ballyronan Road, Magherafelt. This comprised a total of 146,927 sq ft on a site of 32.5 acres.

Channel Commercial Park in Titanic Quarter continues to be an attractive destination for local businesses. The location of the park and quality of the accommodation appeals to a wide variety of tenants, this has been highlighted again by the recent expansion of BLK Box Fitness – who now occupy in excess of 40,000 sq ft within the park and continue to expand.

Another noteworthy transaction within the park was Smith Metals taking a 5 year lease on a 7,588 sq ft warehouse unit.

In Derry~Londonderry a large facility in Spring-town Industrial Estate sold in late December. This comprised a total of 38,000 sq ft on a site of 2.52 acres and offered an opportunity to purchase in a popular and well located area.

On the supply front another large industrial facility at Caulside Drive in Antrim has come to the market, the former manufacturing facility extends to 99,572 sq ft and benefits from an adjoining site that extends to 5.4 acres – the asking price of £3.75m is below the construction cost for this type of facility, especially when the additional lands are factored in.

15 Ballinderry Road, Lisburn has also come to the market former manufacturing and distribution warehouse facility extends to 32,884 sq ft on a site of 2.48 acres – the asking price of £1.5m reflects a capital value of £46 per square foot, also emphasising that capital values remain substantially below the cost of replacement.


Location Size (sq ft) Type

Ballyronan Road, Magherafelt 146,927 Sale

14 Kilbegs Road, Antrim 56,741 Letting

Springtown Industrial Estate, Derry/Londonderry 38,000 Sale

Heron Road, Belfast 26,400 Sale

Channel Commercial Park, Belfast 14,348 Letting

Channel Commercial Park, Belfast 7,588 Letting

Total 290,004

Notable Industrial Transactions, Q4 2018

With the increase in delivery-orientated purchasing comes a potential boon for the industrial sector. Advanced distribution centres are now commonplace in many industrial parks across the UK. What were once termed warehouses are now referred to as ‘fulfilment centres’ and we have already seen Amazon locate within Titanic Quarter which is only the start of things to come.

2019Outlook

2019 Outlook - Synopsis

Investment

• Volumes uncertain due to political instability.

• UK investors looking for value in the regions.

• Multi-family and logistic sectors worth watching.

Office

• Demand continues despite political uncertainties.

• Headline rents to stabilise between £21-23 psf.

• Demand continuing for serviced offices and co-working spaces.

Retail - One To Watch!

• There may be value in retail given the lack of sentiment towards this sector.

Industrial

• Demand withing retail/logistics sector is increasing.

Opportunities

• Continued interest in buy to let, student accommodation and serviced apartments.

BELFASTMontgomery House, 29-33 Montgomery Street, Belfast, BT1 4NXT: +44-2890-501501E: [email protected]

DUBLIN St. Stephen’s Green House,Earlsfort Terrace, Dublin 2D02 PH42T: +353 1 638 2700E: [email protected]

CORK1 South Mall,CorkT12 CCN3T: +353 21 427 5079E: [email protected]

LONDON33 Cavendish Square, Marylebone, LondonUnited Kingdom, W1G 0PWT: +44-203-714-9055E: [email protected]

Our Offices

lisney.com

@LisneyBelfast

Lisney Belfast


Global View

Perc

enta

ge G

row

th

7%

0

1%

2%

3%

4%

5%

6%

8%

Northern Ireland

1.1% 1.2%

Republic of Ireland

7.0%

5.6%

United Kingdom

1.3% 1.6%

Global

3.7% 3.5%

EuroZone

1.9% 1.6%

2018* GROWTH VERSUS 2019 FORECAST

2018 2019 Forecast

* Please note that the values used will not be confirmed until the end of Q1 2019 and are estimates.

Chris CampbellMarketing Manager

Jonathan HaugheySurveyor

The Lisney Research Team

David McNellisDirector (Agency)

Nicky FinniestonDirector (Retail & Investment)

Declan FlynnManaging Director

Andrew GawleyDirector (Industrial Agency)

Stephen ChambersAssociate Director (Investment)

Gareth JohnstonDirector (ProfessionalServices)

Retail 10.2% - belfast.lisney.com · Annual Ofﬁce Take Up 2013 -2018 2013 2014 2018 Square Feet...

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