CBRE NI has revealed that Northern Ireland’s commercial investment sector held steady in 2023 despite economic challenges, recording total investment volumes of £338 million.
Investment sales were accumulated across 31 transactions, exceeding 2022’s tally of £330m, and mark the investment sector’s strongest performance since 2015.
The standout transactions of the year included the sale of Rushmere Shopping Centre Retail Park in Craigavon for £46.5 million, Forestside Shopping Centre in Belfast for £42 million, Abbey Retail Park in Newtownabbey for £40.6 million, and Foyleside Shopping Centre in Derry/Londonderry for £27 million.
Gavin Elliott, Senior Director at CBRE NI, commented on the market trends:
“2023 has been a positive year with reference to investment sale volumes and we expect 2024 will see improved real estate performance supported by declining UK inflation rates and a stabilisation in long-term interest rates.
“Yields and capital values have already begun to stabilise in some sectors, and occupier markets are still driving rental growth particularly in the residential, student and industrial sectors.”
Despite concerns about the rising cost of debt and economic headwinds, the robust investment volumes in 2023 underscored sustained investor confidence in Northern Ireland’s commercial real estate.
Domestic investors played a pivotal role, comprising 74% of the market share, while institutional investors and property companies acquired 24% and 2%, respectively.
Retail emerged as the dominant investment sector, representing 67% of the total spend, with the office sector following at 18%.
However, the alternative sector saw a notable decline, constituting only 7% of the overall investment spend in 2023 compared to 22% in the previous year. We do however expect the alternative sectors will experience a strong rebound in 2024.
Throughout 2023, demand for quality, well-let assets with strong Environmental, Social, and Governance (ESG) credentials remained high, reflecting the growing emphasis on responsible business and the likely added pressure from shareholders on organisations to prioritise sustainability.
Occupiers and landlords alike will be focusing on how they report, monitor, and improve their ESG credentials moving forward into 2024 and beyond.
Gavin further noted:
“As interest rates may constrain funders’ willingness to lend, there is a potential market opportunity for cash-rich investors to acquire quality commercial real estate assets and implement counter-cyclical investment strategies.
“Indeed during 2023, investors gravitated towards value-add opportunities which offered higher yields with limited availability of debt, this is illustrated by the shopping centre sector which accounted for over 36% of the total investment spend during the year.
“The unique position of Northern Ireland, with access to both UK and European markets through the Windsor Framework, continues to present an opportunity for further substantial growth in the investment sector, and wider commercial property market in 2024.
“However, as we have previously stated over the last 18 months, it is imperative that Stormont is restored in order to fully realise these opportunities.”