While sentiment remains generally cautious, the north’s commercial property sector is showing tentative signs of recovery, though with significant variations across different sub-sectors, a quarterly survey has revealed.
The Royal Institution of Chartered Surveyors (Rics), in its commercial property monitor for the second quarter of this year (April-June), says that overall occupier demand in the region rose at its fastest rate seen in three years, bolstered by the industrial sector.
But rents, particularly in the office and retail sectors, continue to weigh heavily, leading to subdued demand in those sub-sectors.
A net balance of 10% of Northern Ireland property professionals who engaged with the latest survey reported a rise in overall occupier demand, which is the highest this balance has been since 2022, and up from 6% in quarter one, with the upturn being largely driven by demand for industrial space.
A net balance of 40% of respondents said that demand for this sub-sector increased in the quarter, while demand for office space was reported to have been flat and retail experienced a fall (a net balance of minus-10%).
Respondents in Northern Ireland predict rents to increase overall in the short-term, with a net balance of 13% expecting rents to rise at an all-sector level over the next three months. But again, the outlook for industrial is in contrast to office and retail.
Rents in the industrial sector are expected to rise over the next three months, with a net balance of 70% of local respondents expecting an increase.
In contrast, rents in both the office and retail sub-sectors are expected to fall through the third quarter of this year (net balances of -20% and -10% respectively)
On a 12-month basis, surveyors in the north remain optimistic overall on the outlook for commercial property rents too.
Some 7% of respondents expect rents to rise at all sector level, albeit this is down from the 15% that was noted in the Q1 survey.
Office and retail are expected to see rents edge lower, with net balance of -10% and -30% respectively, whilst rents for industrial space are expected to continue moving upwards over the next year (a net balance of 60%).
Garrett O’Hare, regional commercial property spokesman for Rics (Kelvin Boyes / Press Eye)
When it comes to capital value expectations, respondents in Northern Ireland remain cautious, with a net balance of minus-10% expecting capital values to fall over the next three months.
The industrial sector continues to outperform the other sub-sectors on this front too, as a net balance of 40% of respondents anticipate capital values will rise over the next three months.
Garrett O’Hare, managing director of Bradley NI and who is regional commercial property spokesman for Rics, said: “The commercial market in Northern Ireland has faced turbulence in recent years, but it is encouraging to see the report noting that surveyors are reporting a rise in overall occupier demand.
“With increases in national insurance earlier this year, inflation continuing to be a challenge for many businesses, and wider structural changes in the sector, it is unsurprising to see that demand for retail space remains subdued.
“While the outlook on rent expectations looks more promising overall, we are cautious when it comes to the outlook of capital values as the sector continues to navigate the many challenges it is facing.”