Insights & Research

Commercial property investment increases despite political headwinds

Investment transaction volumes in commercial property in Northern Ireland over the first nine months of the year was 59% higher than the same period in 2022, despite ongoing political instability, a new report has found.

The figure was revealed by leading commercial property agency CBRE Northern Ireland in its latest quarterly report on the performance of the sector.

Brian Lavery, Managing Director, CBRE NI said:

“During the first three quarters of this year, there has been £277 million transacted in the commercial investment market in Northern Ireland, with spending in the past three months alone reaching £122m.

“Retail investment witnessed the highest level of business over the period, accounting for 71% of all activity across the year.

“These are encouraging signs however the majority of the spend is locally sourced as we continue to see the decision-making of external investors into all sectors negatively impacted by local geopolitical factors.”

Further findings of the report include:

  • Retail properties accounted for the largest transactions in Q3 with Forestside Shopping Centre and Abbey Retail Park changing hands for £42m and £40m respectively.
  • The hotel sector has also been positive with the off-market purchase of The Hilton Belfast by Pandox AB for a reported £40m, the largest hotel transaction ever completed in the city.
  • Hotel occupancy is now slightly exceeding 2019 levels while Average Daily Rate (ADR) continues to achieve record highs.
  • The industrial and logistics market has been slow which is in keeping with trends over the summer months but notable deals include an agreement to lease 100,000 sq ft in Lisburn on a design and build basis.
  • The take up of office space for Q3 was recorded at 38,149 sq ft, representing a substantial reduction on both the Q1 and Q2 figures of 43% and 54% respectively.
  • Since the start of the year, high-net-worth domestic investors have comprised 75% of the total investment spend.

Mr Lavery continued:

“The recent Northern Ireland Investment Summit did a tremendous job at showcasing this region to the world. However, much of the discussion at the event remained around political instability and concerns around how the ongoing lack of a Northern Ireland Executive is being viewed across the globe.

“Other challenges remain including a large amount of secondary stock in the office market that will require significant investment to bring up to the required standard as regards sustainability and finishes, to make them attractive particularly to external investors.

“In order to ensure the feasibility of these projects, we envisage many of these buildings will have to be converted to alternative uses such as student accommodation or build-to-rent.

“Elsewhere, there are strong signs of positivity with plans announced for a new hotel close to Belfast International Airport while we also eagerly await the opening of the Room2 apart-hotel on Queen Street in Belfast, the first new hotel to open in the city in three years.

“Looking ahead, we anticipate the volume of deals in the fourth quarter to be lower than the most recent three months with transactions not yet in legals unlikely to complete before the end of the year.

“We will also continue to keep a close watch on interest rates, now expected to be at or reaching their peak, having negatively impacted investment pricing across all sectors over the last 12 months.”

The full report can be viewed here.