Commercial property investment volume in Q1 2019 was healthy for an opening quarter at £42.5m, 2.5 times that of the same period in 2018 but 47 percent below the five-year quarterly average, according to new research published today by Lambert Smith Hampton.
The Investment Transactions Northern Ireland Bulletin Q1 2019 showed that while volume has been consistent over the last four quarters, there were only five transactions recorded during Q1 2019, the lowest level since Q1 2014.
However, it is expected that Q2 will see a significant pickup in volume with 21 deals either completed or agreed, totalling approximately £75m.
The largest deal in Q1 was a local government department’s £16m purchase of James House at the Gasworks. The Q1 transactions represented a mix of asset classes. Offices, however, drove volume with the sale of James House and Donegall House.
While there were a flurry of large retail transactions in late 2018, retail was notably absent from Q1 2019.
Local investors were responsible for the majority of activity in Q1 2019, with current occupiers purchasing properties. A local government occupier purchased James House and convenience retail operator Henderson Group purchased a portfolio of petrol filling stations which they already occupied as tenant (NIY 6.82%).
Martin McCloy, director of capital markets, Lambert Smith Hampton, said:
“The Northern Irish investment market continues to be impeded by the local and national political situation. It is generally accepted that the six-month extension to the EU/UK withdrawal date and preventing the UK crashing out of the EU in a ‘no-deal’ scenario was the best outcome at the end of the March for the UK and Northern Ireland. However, there is no doubt that the continuation of this period of uncertainty will continue to frustrate the investment market.”
Since Q2 2016, just prior to the EU referendum, there has been a steady decline in investment activity in Northern Ireland. The quarterly average of the ten quarters pre-referendum was £101m, compared with £63m in the ten quarters post-referendum.
The lengthy Brexit uncertainty, coupled with the absence of the local Executive, has fed into investor caution and a delay in both buyers/sellers decisions. The ‘wait-and-see’ attitude has created a lack of supply to the market, however, good quality assets when brought to the market are in demand.
Mr McCloy added: “Properties with solid fundamentals will remain attractive to investors. A recent report by MSCI reported that Belfast was among the top performing UK office investment markets in 2018. Coupled with the strong office occupier market, we expect that in 2019 office investment will become the predominant asset class in Northern Ireland, over taking retail.”
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