The Belfast office market set a new annual record in 2018, with total take-up reaching highs of 885,023 sq ft, more than double that of 2017 and 82 percent above the five-year average, according to Lambert Smith Hampton’s Ireland Office Market Report 2019 which was published today.
The outstanding year was underpinned by the two single largest lettings of the past decade, PwC’s pre-let of 155,012 sq ft at Merchant Square and the Department of Finance’s 150,000 sq ft lease of Nine Lanyon Place.
Occupier demand for high quality space continued with grade A stock accounting for three-quarters of take-up. The increase in grade A supply noted at the end of 2017 was central to satisfying 2018 demand.
Annual take-up was driven by two sectors, which combined were responsible for two-thirds of take-up, specifically technology, media and telecoms (33 percent) and professional services (32 percent) sectors. While these sectors were active across all floorplate sizes, they dominated the sub-5,000 sq ft market.
Serviced offices continue to expand their presence in Belfast, with almost 75,000 sq ft of additional space dedicated to this sector during 2018. Clockwise opened a 30,319 sq ft co-working office at the newly refurbished River House, BESpoke announced their expansion into Northern Ireland with a 19,774 sq ft letting at Adelaide Exchange and Ormeau Baths extended by 7,873 sq ft.
Belfast’s prime headline rent has increased steadily since 2011, from £12.00 per sq ft to the current level of £22.00 per sq ft. While rents are forecast to rise incrementally again during 2019, growth will be relatively modest. The absence of significant new build development indicates that no real step change will occur until additional new build stock is delivered.
Prime office yields stand at circa 6.00 percent with a number of prime city centre assets transacting over the past 12 months. In Q3, an undisclosed local propco purchased the Metro Building for £21.8m (NIY 5.75 percent) and Belfast Harbour Commissioner’s purchased Obel 68 for £15.2m (NIY 6.73 percent).
Greg Henry, associate director of agency at Lambert Smith Hampton, said:
“Take-up across Ireland was record breaking in 2018, exceeding the 5.5m sq ft mark for the first time. In addition to the overall record breaking activity, take-up in the Dublin city centre, Belfast and Cork markets each surpassed previous highs.
“Despite the challenging political climate, Belfast continues to demonstrate resilience. The recent announcement of Deloitte as anchor tenant at Bedford Square suggests that take-up will remain strong into 2019. New entrants are taking advantage of the talent, clusters and ultrafast broadband benefits that Belfast offers while long-standing occupiers are continuing to show their commitment to the city.”
Development activity in Belfast is relatively healthy, although speculative build development has been limited with new schemes predominantly driven by pre-lets. Currently under construction is the second phase of Bedford Square, a 213,000 sq development due for completion in 2020, and Lazer 2 at Weavers Court Business Park (40,000 sq ft).
While a lull in development activity is expected, a number of new build schemes are poised to commence including Belfast Waterside (250,000 sq ft), City Quays 3 (250,000 sq ft) and International HQ, Tribeca (150,000 sq ft).
Availability contracted by over a quarter during 2018. At 656,637, current availability is equivalent to 1.4 years of supply, the lowest of Ireland’s key markets.
Mr Henry added: “Over recent years availability of grade A space has been fueled by refurbishments. In addition to the aforementioned, refurbishments are ongoing at East Tower at Lanyon Place (42,000 sq ft), McAuley House (25,000 sq ft) and20 Adelaide Street (18,858 sq ft). The expected vacuum before new development is delivered will lead to an ever-tightening grade A supply in Belfast. This could negatively impact 2019 take-up, but does present an excellent opportunity for landlords of secondary assets to reposition and add value.”
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