Belfast take-up surges in Q4

By James Buckley - Wednesday, January 10, 2018 9:24

Q4 2017 was the strongest quarter for the Belfast office market in two years, bringing the total take-up of office space for 2017 to 430,290 sq ft.

According to Savills Northern Ireland, this is the second consecutive year – post Brexit – of robust take up, with levels back to the peak of 2007 – and rents around 50% higher. However, Savills note the real prime rent has yet to be tested due to a lack of new stock.

The most notable transaction of 2017 was the HMRC pre-letting of 104,220 sq ft at Erskine House on Chichester Street, however Technology, Media & Telecommunications (TMT) occupiers continued to be the most active sector, accounting for 19 of the 47 transactions – and 33% of the overall take-up.

Simon McEvoy of Savills Northern Ireland, said: “Despite a challenging market in 2017, there were a number of positives, including HMRC taking the largest pre-let on record at Erskine House, the mid-letting of Weaving Works to First Derivatives and the continued new demand and growth in the TMT Sector demonstrating the attractiveness of the city for FDI’s. However the supply of new Grade A offices remains the limiting factor.”

The current vacancy rate stands at 7.2%, with the more revealing and relevant Grade A vacancy at 3.1%, and there are no city centre options available that can offer in excess of 25,000 sq. ft. of contiguous space. 

Savills Northern Ireland anticipate further pre-lets in 2018 with larger occupiers securing their preferred buildings, however, for the market to continue to meet indigenous and FDI demand, speculative development will be required to start in the city centre.

McEvoy also noted: “There are a number of large occupiers in Belfast with upcoming lease events in largely defunct buildings. A select few are in the position to agree a pre-let however the majority will only consider options that have started the process of delivery. We need to commence construction and start the supply tap now to meet this demand.”

After phenomenal rental growth in 2015 and 2016 of over 25%, prime rents in 2017 held 2016’s level of £21.50 per sq. ft., however this was due to lack of any new developments available in the market, with demand largely met in 2017 with the delivery of refurbished space.

Refurbished offices typically offer occupiers improved specification in an existing building at a discounted rent from new developments, however this discount has largely eroded with the next wave of refurbished offices due in 2018 quoting £23.50 per sq. ft.

McEvoy continued: “It is great that we have a pipeline of refurbishment projects to help meet immediate demand, however if Belfast is to continue to attract global firms that are fighting to retain and attract employees, then we need to deliver the next generation spaces, replacing tired, old and uninspiring accommodation with modern office buildings that provide plenty of amenity.”

Savills expect that when the supply starts to facilitate this next phase of corporates occupiers moving from old to new, it will motivate others to follow.

McEvoy concluded: “There are a wave of new high quality office developments proposed for Belfast that would deliver accommodation on a par with other UK & Ireland regional centres, including Paper Exchange, One Bankmore Square and 4-5 Donegall Square, and it is important that for the continued success of the city that they are delivered.”

jbuckley@costar.co.uk

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