Demand continues for serviced offices and co-working spaces

By the end of 2018, office take up in Northern Ireland totalled a record 885,000 sq.ft. according to research completed by leading commercial property agents Lisney.

In a sector becoming more and more dominated by tech and digital companies, the market is also witnessing a pressing demand for serviced offices and co-working spaces which is expected to continue in the coming years.

Declan Flynn, Managing Director of Lisney Northern Ireland, which specialises in office, retail, leisure and industrial property acquisition, disposal and investment, commented:

“Dublin has seen an incredible 93% increase in co-working space take up within the last 18 months and having already made its way north, we believe this trend will remain and could trigger a structural shift within the general office market.”

Additional headline findings from Lisney’s most recent Commercial Property Report revealed that:

  • £165m investment transactions completed in 2018
  • £100m + new investment product came to market in Q4 2018
  • Office sector has witnessed some of the strongest pricing ever
  • Lack of new office stock has remained an issue in 2018 and despite a number of refurbishments on the horizons, supply constraints in floor plates in excess of 20,000 sq. ft. are likely to continue
  • Prime retail occupancy rates improved from 13% to 12.8%
  • 60,000 sq. ft. of new retail openings in Belfast injected life back into the city centre’s retail scene despite Belfast’s prime core falling back slightly to 10.2% from 9.1% in 2017
  • Drive-thru opportunities emerging popular in retail sector with Tim Hortons and Subway making initial forays
  • 2m + sq. ft. industrial take up in 2018 has been driven by retail distribution centres that enables high speed delivery to customers

Mr Flynn continued:

“Q4 saw a flurry of investment product come to market with annual transactions totalling £165m and the sale of Bow Street Mall to a private investor for £12.25m recorded as the largest transaction of the quarter.

“The office sector has performed well with investment in the sector achieving good depth of local, national and international demand demonstrating liquidity for good quality, appropriately priced product. Opportunities for the region can therefore remain by maintaining the discount or ‘yield gap’ between Northern Ireland and rest of the UK.

“Notable transactions include the sale of The Metro Building for £21.9m and the sale of Obel 68 for £15.2m. However, the lack of new office stock has remained an issue in 2018.

“Office supply will be bolstered by refurbished buildings such as Chichester House and new schemes such as the ‘Sixth’, City Quays 3 and Castlebrooke Investments’ ‘Tribeca’ that will include 1,500,000 sq. ft. residential and office space with retail and hospitality space with the first phase including two Grade A office buildings extending to 180,000 sq. ft.

“Average office take up over the last five years is approximately 460,000 sq. ft. which contextualises just how strong demand for office accommodation is at present, and we can expect headline rents to reach £23 per sq. ft. in 2019.”

The retail sector in Belfast city centre experienced a significant downturn in footfall in Quarter 3 and into Quarter 4 following the fire in Primark located in the Bank Buildings.

Mr Flynn said:

“It’s no secret 2018 has been a testing year for retail in Belfast with completely unexpected circumstances thrust upon the city centre.

“Not surprisingly activity has been slower than anticipated. However, there is evidence of a number of retailers pursuing new opportunities on our high streets, shopping centres and retail parks. Irish department store Guineys opened its doors in Belfast as did Matalan in CastleCourt, and out of town Brand Max, the Mike Ashley-owned discount fashion retailer, entered the Northern Ireland market in Connswater Shopping Centre.

“Interestingly the food and beverage sector has continued to be buoyant with a number of outlets incorporating a drive-thru offerings to customers.

“On an industrial front, requirements have been driven by retail nationwide distribution and this is very much in line with activity in the rest of the UK. Amazon has already set up shop in Titanic Quarter’s Channel Commercial Park and we believe this is only the start of things to come as delivery-orientated purchasing continues to grow.

“Opportunities do exist in Northern Ireland with emerging supply of refurbished and new stock and we are forecasting further growth in interest within the Private Rented Sector, student accommodation and serviced apartment sectors.”

Lisney’s latest report on the Northern Ireland commercial property market can be viewed in full here: https://www.lisney.com/research/publications-ni/

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