LISNEY BELFAST COMMERCIAL

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Hilda Bond
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1 Quarter 3, The Market in Numbers Q 3 THE LISNEY BELFAST COMMERCIAL PROPERTY REPORT 199 m 199 million of transactions during Q3 91.5k sq ft Take up throughout Belfast City Centre in Quarter 3, Retail 150 psf za Prime rents stabilising in Belfast City Centre The Difference 263k sq ft Notable transactions during Quarter 3,

2 Q3 has seen a significant jump in volumes to 199m following the quiet opening months of the year with less than 30m transacted in the run up to the summer. The most significant transaction being Wirefox s acquisition of Castlecourt in a deal worth c. 123m. In a subdued retail investment market right across the UK it s positive to see off shore equity buying into Northern Irish retail, and when combined with Tesco, Newry and Valley Retail Park, Newtownabbey selling for a combined 39m we re seeing a much busier start to H2. investments and a portfolio of care homes make up a significant proportion of the remainder. Million (Sterling) Volumes, Q Q3 200m 199m 180m 160m 140m 120m 100m 80m 60m 45m 40m 40m 20m 18m 8m Q Q Q1 Q2 Q3 Our prediction of investment volumes hitting 300m looks to be on course with a number of transactions including Riverside Retail Park in Coleraine set to complete before year end, and with Longwood Retail Park in Newtownabbey currently in the market we could potentially surpass that estimate. Either way volumes have surpassed last year s levels which is a notable positive in our current Brexit vacuum. Where we must sound a note of caution though is in the depth of the purchaser market. A number of the assets agreed or recently traded had been in the market longer than first intended and with funds and Property Companies still relatively quiet we re looking to private equity and local asset managers to drive activity for the larger lots. Delivering enough product with return profiles suited to this type of purchaser remains a challenge, however our main sectors remain robust with demonstrable, sustainable growth which positions NI well to attract investors when the uncertainty associated with Brexit begins to clear as exit negotiations advance. One notable sector where we can point to very strong performance is sub 2m. Anecdotally many of the purchasers are utilising the tax benefits of SIPPs and SSASs, and are keen to deploy capital given uncertainty in the equity markets. Hence where properties are relatively low risk and well let we have seen pricing surpass equivalent investments in GB due to lack of stock locally. In our current low interest rate environment property remains a compelling proposition hence we expect this trend to continue in the short to medium term. On The Market, Q3 Property Details Pricing Longwood Retail Park, Newtownabbey 190,000 sq.ft retail park 47.78m/7.25% Laharna Retail Park, Larne 48,000 sq.ft retail park 4.87/9.5% (Remarketed) M2 Trade Centre, Duncrue 38,000 sq.ft industrial park 1.15/8.82% (Agreed) Hillview House, Newtownabbey 55,000 sq.ft office 3.75/13.08% (Agreed) Page 2 The Lisney Northern Ireland Commercial Property Report Q3

Notable Transactions, Q3 Property Details Pricing Status Castlecourt Shopping Centre, Belfast 340,000 sq.ft. covered shopping centre 123m/6.27% Sold Valley Retail Park, Newtownabbey 100,000 sq.ft. retail park 11.

3 Notable Transactions, Q3 Property Details Pricing Status Castlecourt Shopping Centre, Belfast 340,000 sq.ft. covered shopping centre 123m/6.27% Sold Valley Retail Park, Newtownabbey 100,000 sq.ft. retail park 11.1/8.25% Sold Tesco Extra, Newry 94,000 sq.ft. foodstore 27.7m/6% Sold Lesley Exchange, Belfast 18,263 sq.ft. office 3m/7.85% Sold Take-up levels in Quarter 3 reflected a more functional occupier market with c. 91,557 sq. ft. of City centre office space transacting compared to c. 43,000 sq. ft. and c. 18,034 sq. ft. in Q2 and Q1 respectively. sectors, to include software design, cyber security, fintech and digital services. This is a trend which we expect to continue through to Q4 due to a number of lettings which have been agreed in Q3, to occupiers operating in these sectors. Headline Rents, Q2 Deals completed show a healthy spread of take up ranging from transactions of 1,000 sq. ft. to 25,000 sq. ft. with a mix of both indigenous occupiers and new market entrants taking space; an encouraging indicator of market resilience given the ongoing political uncertainty. Belfast s reputation as a hotbed of activity in the tech and digital sectors continues to gain momentum and is further evidenced by Q3 office take up which shows c. 56% of letting activity attributable to occupiers operating in these Rent /PSF Headline Rents Chichester House will be Belfast s first office development to carry a WiredScore certification Page 3 The Lisney Northern Ireland Commercial Property Report Q3

4 In light of this activity, We are now witnessing developers who are prepared to embrace the change in Belfast s occupier market by future proofing their buildings ensuring top class digital connectivity. In Q3, Causeway Asset Management launched Chichester House, Chichester Street and in a Belfast market first, the building will have a WiredScore certification. WiredScore is the premier provider of a standardised rating system designed to identify, evaluate and verify commercial buildings with the fastest and most reliable internet connections. Q3 Take Up Analysis 56% Tech/Digital Companies 51,023 sq ft 44% Other Occupiers 40,534 sq ft Total Q3 Take Up 91,557 sq ft Take Up, Q3 Landlord Tenant Size (sq. ft.) Location Armagh House Limited First Derivatives 25,038 Belfast Harbour Commissioners ITV 11,564 Straidorn Properties Metaswitch 5,500 Redbay Developments Instil Media 4,445 Private Landlord Anomali 4,176 1st 4thFloors, Weaving Works, Ormeau Avenue 8th Floor, City Quays 2, Clarendon Dock 4th Floor, Flax House, Adelaide Street 3rd Floor, Linen Loft, Adelaide Street 4th Floor, State Building, Arthur Street In Focus WiredScore Wired Certification is a commercial real estate rating system that empowers landlords to understand, improve, and promote their buildings digital infrastructure. Internet is among the top three most important factors for tenants who are searching for office space, along with cost and location. Until now there has been very little information available to tenants about the quality of internet connectivity in office spaces. Wired Certification provides that transparency and access to information to tenants. The certification measures the aspects of developments and redevelopments that will most significantly impact a tenant s ability to run their business. Getting Wired Certified is a 3 step process and once achieved, a building s Wired Certification level is valid for 2 years or until the building is 2/3rds full. Maintaining a current WiredScore Certificate gives occupiers the confidence that a landlord is keeping pace with developing technologies and has taken the required measures to provide reliable digital connectivity today while future-proof the building for tomorrow. Page 4 The Lisney Northern Ireland Commercial Property Report Q3

5 Retail Both opening quarters of were similarly busy in terms of new lettings, but differed in where activity was taking place. Q1 was in the majority, Belfast centric, as we have become used to, but turning against the grain in Q2, the greater part of activity was spread beyond Belfast in regional locations. Q3 saw sustained levels of activity, but was more of a balance between Belfast and the regions. Notably however in a change to the norm, almost all Belfast activity happened outside the City Centre, as the lack available units is continuing to impede new lettings and slowing rental growth. In another variation to the previous quarters, regional activity was not led by border locations, where new openings slowed, as quality retail pitches begin to reach full occupancy. Coffee operators continue to be amongst the most active, with competitive tension and a desire to build, or at least maintain market share driving expansion. Caffe Nero has been the most active in Q3 and Canadian Fast Food Operator Tim Horton s is due to complete their first acquisition early in Q4. With more on the way we expect this market to continue to thrive especially where there is scope for drive-thrus. Tim Hortons will arrive in NI during Q4 In the retail warehousing sector vacancy levels continue to fall, with a considerable pool of retailers actively searching for opportunities to expand their portfolios. Marks and Spencer hit the headlines as they announced plans for a new c. 16,000 sq ft store in Craigavon, on part of the site formerly occupied by B&Q. Elsewhere, TK Maxx completed their move from Bow Street Mall to Laganbank Retail Park, Lisburn, and Lidl opened at their newly developed site in Connswater, Belfast. We anticipate a busy start to Q4 with retailers pushing to finalise acquisitions and openings prior to Christmas, before turning to focus on their 2018 plans. Supply in key areas will continue to hamper progress, most notably in Belfast City Centre and in the major border towns where we expect to see the euro spend surpass levels of Notable Transactions, Q3 Trader Type Location Town/City Sostrene Grene Shopping Centre The Quays Newry Yankee Candle Shopping Centre Bloomfield SC & RP Bangor JD Sports Shopping Centre Bloomfield SC & RP Bangor Inglot Shopping Centre Foyleside SC Londonderry Specsavers High Street Conway Square Newtownards Greggs Food & Beverage Church Street Coleraine Caffé Nero Food & Beverage Ormeau Road Belfast Caffé Nero Food & Beverage High Street Newcastle Little Wing Food & Beverage Lisburn Square Lisburn TK Maxx Out of Town Laganbank Retail Park Lisburn Page 5 The Lisney Northern Ireland Commercial Property Report Q3

The protectionist measures being imposed in the Bombardier/Boeing debate is the major discussion point in the industrial sector at present although there appears to be some murmurings of a potential

6 The protectionist measures being imposed in the Bombardier/Boeing debate is the major discussion point in the industrial sector at present although there appears to be some murmurings of a potential solution at the time of writing. We do hope that an agreement can be reached for the greater good of the local economy. This coupled with the persistent stories around Brexit and Stormont and the news that Caterpillar are proposing to downsize has created some negativity which you would expect to result in lower activity. Ryobi took further space at Kilrrot Business Park However to counteract this it should be noted that according to insolvency and restructuring trade body R3 and somewhat paradoxically Northern Ireland s manufacturing sector has the lowest rate of firms in the higher than normal risk of insolvency category compared to anywhere else in the UK. As expected the summer months were generally a slower period in the market however and notably Ryobi have taken further space within Kilroot Business Park, Carrickfergus, bringing their total occupation on site up to nearly 80,000 sq ft. Armagh City, Banbridge and Craigavon Borough Council and we understand it will be regenerated to enhance the area and complement the planned park and ride facility on an adjacent site. In addition at 5 Michelin Road in Mallusk a unit of 20,897 sq ft on a regular shaped site of 2.75 acres has been acquired for well over the asking price. In a more provincial context up to 100,000 Sq Ft has become available in Magherafelt with the first unit in the develeopment to come to the market comprising more than 41,000 sq ft of warehouse/ industrial accommodation. A number of other deals have been completed to include the former Denny s site at Corcrain Road, Portadown, comprising 137,660sq ft on 6.15 acres. The property has been purchased by Meanwhile other positive corporate activity in the sector is evidenced with the corporate purchase of Moy Park by Pilgrim s Pride Corporation for $1.3 billion. Notable Transactions, Q2 Location Size (Sq Ft) Type 6 Corcrain Road, Portadown 137,660 Sale Kilroot Business Park, Carrickfergus 79,500 Lease Building 1, Unit 4 Central Park, Mallusk 22,421 Lease 5 Michelin Road, Mallusk 20,897 Sale A3, Heron Business Park, Belfast 3,300 Sale Total 263,788 Page 6 The Lisney Northern Ireland Commercial Property Report Q3

A further positive announcement is that goods exports from Northern Ireland for quarter 2, shows an

According to figures released by HM Revenue and Customs this is the best quarter on record in nominal

If a hard border occurs during Brexit then this would certainly affect local exporters.

active in midst of inflationary pressures Brexit uncertainty has affected purchaser pool Take up levels in

There is a current derth of large requirements in excess of 30,000 sq ft.

Retail Retail Demand strong in prime locations. Cost Inflation resulting in higher prices at the tills.

Demand from export focused manufacturing strong reflecting the fall in the value of sterling.

com CORK 1 South Mall, Cork T12 CCN3 T: +353 21 427 5079 E: cork@lisney.

7 A further positive announcement is that goods exports from Northern Ireland for quarter 2, shows an increase of 12% (compared to Quarter 2 in 2016). According to figures released by HM Revenue and Customs this is the best quarter on record in nominal terms, and shows that the biggest increase from NI was to the Republic of Ireland. If a hard border occurs during Brexit then this would certainly affect local exporters. Our s Outlook values to surpass last year s totals and potentially break 300m Pension buyers remain very active in midst of inflationary pressures Brexit uncertainty has affected purchaser pool Take up levels in will be less than the long term average of 300K to 400K P.A. There is a current derth of large requirements in excess of 30,000 sq ft. Supply to increase throughout 2018 (mainly refurbished buildings). Retail Retail Demand strong in prime locations. Cost Inflation resulting in higher prices at the tills. Competitive tension in the coffee sector. Demand from export focused manufacturing strong reflecting the fall in the value of sterling. BELFAST Montgomery House, Montgomery Street, Belfast, BT1 4NX T: E: belfast@lisney.com DUBLIN St. Stephen s Green House, Earlsfort Terrace, Dublin 2 D02 PH42 T: E: dublin@lisney.com CORK 1 South Mall, Cork T12 CCN3 T: E: cork@lisney.com LONDON 33 Cavendish Square, Marylebone, London United Kingdom, W1G 0PW T: E: london@lisney.com The Lisney Research Team Declan Flynn Managing Director David McNellis Director (Agency) Gareth Johnston Director (Professional Services) Nicky Finnieston Director (Retail & ) Stephen Chambers Associate Director () Andrew Gawley Associate Director (Agency) Lloyd Hannigan Senior Surveyor (Agency) Jonathan Haughey Surveyor Chris Campbell Marketing Manager The Lisney Northern Ireland Commercial Property Report Lisney Northern Ireland lisney.com

55+ m. 500k+ 78,971. CVA Retail market dominated by CVA s and restructuring. THE LISNEY BELFAST COMMERCIAL PROPERTY REPORT. The Market in Numbers Q 2

55+ m. 500k+ 78,971. CVA Retail market dominated by CVA s and restructuring. THE LISNEY BELFAST COMMERCIAL PROPERTY REPORT. The Market in Numbers Q 2 Quarter 2, 2018 The Market in Numbers Q 2 THE LISNEY BELFAST COMMERCIAL PROPERTY REPORT Investment 55+ m Investment volumes surpassed 55 million in Q2, 2018 500k+ sq ft take up totalling 268,336 in Q2