An overview of the commercial property market in Belfast

The most notable fact in the Belfast commercial property market has to do with increased vacancy rates, particularly across the retail and industrial sub-sectors. Demand has also been falling steadily, and this fact has forced commercial property owners to increase the number and the quality of incentives in order to let their properties.

However, property experts have recently remarked on the positive outlook of the investment market in Belfast. While in 2011 only four transactions took place in the city, in 2012 the volume of transactions is expected to reach the £100 million mark, a figure that is 75 per cent higher than in the previous year. As of September 2012, £72 million had been already invested in the local commercial property market, and all transactions were related to retail properties. Yield values were estimated to range between 6 and 7.5 per cent, a healthy figure considering the overall state of the market in Belfast.

Office space in Belfast

Over-supply is very evident in Belfast's office market. There are approximately 800,000 square feet available in the city and a further 150,000 in out of town locations. The availability of Grade A office floor space in the city continues to experience an upward trend with no signs of recovery in the near future.

Vacancy rates have increased by 75 per cent over the past year, mostly due to ongoing refurbishment projects. These currently stand at 6.7 per cent. The local council reports that there are 320 vacant properties whose size is 500 square metres and under; 33 vacant units between 500 and 2,000 square metres; and a further 6 between 2,001 and 5,000 square metres. Most vacant office units are located around the Victoria Street area, and across the city, the highest vacancy rates belong to Grade B properties.

On the plus side, the cost of headline rents in Belfast is one of the United Kingdom's most competitive, as it currently stands at £110 per square metre, rising to £135 for air-conditioned units. However, these figures represent a substantial decrease when compared to previous years.

Approximately 55 per cent of the total office floor space in Belfast is occupied by companies in the public sector. There is currently very little demand and very few enquiries originating from the private sector.

The development pipeline is also looking bleak, since at the time of writing there were no future developments for Grade A office space planned. However, recent surveys show that there is an increased availability rate for Grade B office space in the city. During 2012, the amount of refurbished office space has increased from 569,000 to 686,000 square feet.

Retail space in Belfast

According to recent data, vacancy rates for retail space in Belfast rose once again to the current rate of 23.1 per cent, which is significantly higher than the British average of 11 per cent. In fact, 25 per cent of all shop units in Belfast are thought to be vacant. This situation is partly a side effect of the financial crisis, as many retailers in the city have closed down or gone into administration over the past year.

Some major retailers have also decided against renting properties in the city, and this fact has contributed to the appearance of a diminished take-up rate for retail floor space, which could mean that higher vacancy rates are likely to bring about a further drop in rental prices.

However, some large discount retailers are looking to invest in the Belfast market, taking advantage of the current low levels of activity. Most of these retailers require large floor plates that can only be found in out of town locations. If these deals materialise, we can expect to see an increasing shortage of retail stock in Belfast in the medium term.

Industrial space in Belfast

The latest statistics show a rise in the vacancy rates for industrial properties in Belfast. Currently, vacancy rates are estimated at 16 per cent, a figure that is nonetheless on a par with the UK average. According to property analysts, this increase is due to three factors: a rather unattractive market, low availability of premises over 50,000 square feet, and negative growth prospects for the local economy.

The current requirements for industrial space in Belfast are in the region of 1 million square feet, but it seems unlikely that developers will see this figure as an opportunity to build more industrial floor space, given the difficulties involved in obtaining funds.