Posted on Thursday 30 June 2016 by Ulster Business

Brexit unsettles commercial property investors

Uncertainty over Brexit will keep commercial property investors on the sidelines in the coming months, although the weaker pound could provide a buying opportunity.

That is the view of agents CBRE in its latest report which revealed a Northern Ireland commercial property market which has performed well in the first half of the year, but which has been unsettled by the UK’s vote to leave the European Union.

Managing director Brian Lavery said some investors will likely hold off purchasing until there is clearer political and economic landscape.

However, the agent was quick to point out potential for some buyers.

“Currency movements as a result of Brexit could see a unique buying opportunity emerge,” he said. “The uncertainty created could keep interest rates lower for longer which bodes well for investment in real estate. Local investors have remained active particularly outside Belfast in locations such as Banbridge, Strabane and Coleraine.”

He said it recorded 10 investment transactions with a total value of £70m in the second quarter of the year and more are set to come.

“Whilst some decisions have been put on hold in the short term, we feel that other properties due to be brought to the market will proceed regardless in H2 2016, with currently £75 million worth of sales to be launched,” Mr Lavery said.

Assets currently for sale or sale agreed include Downe Retail Park in Downpatrick, agreed at approximately £17 million; Lisnagelvin Shopping Centre in Derry/Londonderry, agreed at approximately £16 million; and Tower Shopping Centre Ballymena, which is guiding £6 million.

When it comes to the office lettings sector, activity was brisk in the first half of the year, although down on the same time last year, according to CBRE.

There were 75,000 square feet of leasing activity recorded in Northern Ireland in the first six months of the year compared to 87,487 in the first half of 2015.

When it comes to rental values, Grade A space is steadily climbing at £17.50 per square foot and will head higher, according to Mr Lavery.

“We expect to see them climb to £18 per sq ft in the next six months. There are currently approximately 750,000 sq ft of active requirements for office accommodation. It is unclear whether all of these will all remain active in the face of the Brexit decision and some occupiers will require reassurance about the corporation tax reduction in 2018.”

Retail was also busy with ecent transactions including Ecco Shoes at Victoria Square, The Entertainer at CastleCourt, Home Bargains at Holywood Exchange and go Outdoors and Smyth’s Toys at Valley Retail Park. A new larger Lidl store at Connswater Retail Park was also granted planning permission.

The report said the current weakness of sterling could see a surge in shoppers to Northern Ireland from the Republic.

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