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RICS Commercial Property Monitor for Northern Ireland – Q4 2023
The NI commercial property market remained sluggish and lacking momentum in Q4 2023, according to the latest Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor. However, there were some improvements on the previous quarter, and forward-looking sentiment for 2024 improved marginally.
A net balance of -5% of NI respondents reported a fall in overall occupier demand, which was an improvement on -9% in Q3. Demand for office and retail space reduced, with net balances of -14% and -33% respectively. However, the rate of decline in occupier demand for office space was slower than before. When it comes to demand from occupiers for industrial space, the indicator continued to be firmly in positive territory with a net balance of +33% of respondents saying occupier demand for industrial space had risen again.
In relation to enquiries from investors, a net balance of -6% of respondents was reported, and although remaining in negative territory, this is up from the -22% that was seen in Q3 2023. Looking at the sub-sectors, enquiries about office space (-50%) saw a fall, whilst enquiries for retail space were reported to be flat and enquiries for industrial space rose (+33%).
As overall demand from occupiers and investors remains subdued in Northern Ireland, this continues to weigh on surveyors’ outlooks, with expectations for rents and capital values remaining in negative territory in the latest report. A net balance of -11% of respondents in NI indicated that they expect net capital values to fall across all sectors over the first quarter of 2024. However, this figure is up from -33% that was seen the same quarter of the year previous. Capital value expectations for retail space have fallen further to a net balance of -50% of respondents, capital values are expected to fall flat regarding office space, whereas a net balance of +17% of surveyors anticipate a rise in the value of industrial space.
A similar pattern is seen across rent expectations with a net balance of -10% of respondents in NI expecting a fall in rents over the next three months, up from -17% in the previous report. This is the seventh consecutive quarter this figure has been in negative territory, albeit less so. Broken down by subsector, rents for industrial space are expected to rise (17%), and falls are anticipated in retail and office space (-33% and –14% respectively).
Garrett O’Hare, RICS NI spokesman and Managing Director of Bradley NI says: “2023 was a turbulent year in the commercial property sector. Increased finance and build costs placed further pressure on new development, as well as, redevelopment and value add opportunities in existing schemes. Demand remains high in the industrial sector, however, anecdotally we’re seeing that transaction volumes were lower than in 2022 largely due to a lack of supply of both secondary property and zoned land for new development. Northern Ireland is regarded as a gateway to both European and global markets, which has attracted significant inward investment over the course of the last 24 months from export businesses seeking to capitalise on the unique opportunities presented in the region,” he continues.
“The office market remains challenging with relatively low transaction volumes as companies continue to evolve and reshape on the back of the cultural changes brought about on the back of Covid-19. However, generally, investors remain ready for strong covenant-led opportunities where lease terms present a favourable and long-term return,” Garrett adds.
