The latest figures show that total returns on commercial property in Belfast significantly outperformed other major European cities in 2014, as investors return to the High Street.
Better than average
MSCI’s Northern Ireland Investment Review, produced in partnership with Ulster University, found that commercial property across Northern Ireland posted year-on-year returns of 10.9% in 2014, up from 7% in 2014 and better than the average European returns of 9.4%.
Belfast also outperformed the likes of Amsterdam, Copenhagen, Lisbon and Stockholm by posting average returns of 10.6%.
Explaining the success
Robert Ditty of the CBRE cited “continuing high levels of income return” as a key reason for the strong figures; but capital values are also recovering as investment returns to the region.
A revaluation of business rates across Northern Ireland and in the centre of Belfast will have had a major impact, particularly as prime properties in areas like Donegall Place saw their bills halved. It has also been suggested that a lack of prime retail spaces elsewhere in the UK has led retailers investing in more readily available units in Northern Ireland.
Particularly telling is the appearance of retailers who previously had no presence in the region. Colliers International's Midsummer Retail Report highlights purchases by Dr Martin's, Michael Kors and Yo Sushi, and Colliers director of professional services Tracy Flannigan says more announcements are on the way.
Office and industrial properties, meanwhile, are seeing more activity as manufacturing, services and retail sectors report strong order growth.
While rising capital values and the availability of quality properties on the market represent a good opportunity for commercial property investors, we believe it’s sensible to sound a note of caution.
Statistics from Springboard and the Northern Ireland Retail Consortium show that footfall was down by 3.5% on high streets and in shopping centres across Northern Ireland in June, the weakest figures in the UK, which shows how important it is for commercial landlords to have reliable tenants in strong positions before hurrying to make an investment.
Nonetheless, with sufficient due diligence, and a continuation of the solid economic growth shown in 2015 so far, Northern Ireland does represent a good opportunity for commercial property investors.
For help collecting commercial rent arrears and maintaining a reliable cash flow, contact a Dukes advisor today.