The Belfast office market offers some of the highest rates of return for global investors compared to cities across the UK and European Union, according to the Northern Ireland Commercial Property Investment Review 2018.
The influential report, prepared by MSCI Real Estate in conjunction with Ulster University, revealed that Belfast is surpassing London, Manchester and Cardiff in terms of total returns (capital value growth and income return) from investment in offices.
Belfast returns reached 12.4% in 2018 – pipped only by the Brighton and Hove region and Edinburgh and well ahead of the average total return for European cities of 8.1%. This strong total return for the Belfast office sector was underpinned by an income return of 7.8%. The report also highlights a market rental growth for offices in NI of 6.7% – the highest in least a decade.
MSCI also reports an income return of 7% across the wider NI commercial property sector, outperforming Scotland (5.5%), Wales (5.8%) and England excluding London (5.0%). It highlights that Northern Ireland’s superior income return relative to other markets across Europe continues to make it an attractively-priced commercial property investment destination for new investors, especially given its strong leasing structures and income profiles. The report indicates a challenging UK-wide retail market but also highlights that the comparatively high income return in the Belfast market continues to make it attractive for investors.
Suzanne Wylie, Chief Executive of Belfast City Council, said: “This report underscores Belfast’s strong investment proposition. It’s very encouraging to see just how strong performance is in the office investment sector in particular – Belfast was one of the top performing UK office markets in 2018. Whilst it’s recognised that the retail sector in Belfast and across the UK continues to face challenges, I’m also encouraged that the report highlights how the Belfast market’s comparatively high income return continues to make it attractive for investors seeking strong tenant profiles and stable income.”
“When we look at the level of ongoing and planned construction activity in Belfast across all sectors and the increased level of investor interest, the future looks very positive. As a council we remain committed to helping to ensure that this level of activity continues and delivers inclusive growth across our city, strengthening the economy and improving quality of life.”
The increase in returns comes as demand for office space in Belfast continues to grow from new and expanding inward investors and indigenous companies. Supply of office space is growing with more than 900,000 square feet of space either completed or under construction across Belfast in 2018. Planning permission has also been granted for more than 2 million square feet of office space.
The Belfast office market and the surrounding region is also set to benefit from a transformative Belfast Region City Deal (BRCD); a planned co-investment package of over £1 billion into 22 ambitious projects over the next 15 years. It’s the result of close collaboration between six councils: Antrim and Newtownabbey Borough Council, Ards and North Down Borough Council, Belfast City Council, Lisburn and Castlereagh Borough Council, Mid and East Antrim Borough Council and Newry, Mourne and Down Borough Council working with Queen’s University Belfast, Ulster University and the regional Further Education Colleges.
The BRCD’s central objectives are to create up to 20,000 new and better jobs and accelerate inclusive economic growth.