Southern investors pour £35m into Belfast property

A southern investor has been confirmed as the new owner of the Park Shopping Centre, at the M1 intersection in Belfast. The purchase price of £11.1 million is the largest single amount spent to date by a Southern property investor in the city.

It is estimated that Southern investors were responsible for 15 per cent of the commercial investments in Belfast in the past 18 months, spending at least £35 million on office and retail opportunities.

The Southern investment interest is such, according to local agents, that there is now a "severe" disparity between property supply and the demand for it. Some agents have begun directing Southern interest towards investments in England and Scotland, which are offering better yields.

The 131,000 sq ft Park Centre, which is anchored by Dunnes, was sold by the Northern Ireland Local Government Officers Superannuation Committee (NILGOSC), which bought it over six years ago for around £4.5 million. The agents for the vendors, Lambert Smith Hampton, report an initial yield of 8.3 per cent. Lambert's investment director in Belfast, Paddy Brennan, said the interest by Southern investors in the North has been the "most significant" development in the local property market over the past 18 months. "It is becoming a major concern for investors North and South that they can't spend their money. We have had to begin looking in Scotland and England for opportunities.

"The optimistic prospect of lasting peace in Northern Ireland, an injection of major investment from overseas companies in conjunction with the strength of the Irish Republic's economy and the Irish property market - with more emphasis on the North - should ensure an exciting future."

He said this contrasted with the British investment market, which has been slowing up as a result of concerns of a global economic slump. He said UK pension funds were "sitting on their hands".

"It could be argued that property has become firstly, more expensive and secondly, more difficult to buy due to the increasing supply and demand influences. I believe, either way, it is healthy for the market, which may create more liquidity and diversification.

"Whether or not Southern investors continue to invest in the North, the market's self-sufficiency continues to flourish with no signs of slowing down."

One sign of this buoyancy was the completion of the biggest single retail investment deal with the sale of the Forestside Centre, at Knockbreda, on the southern outskirts of Belfast, for £50 million. The purchaser was the UK pension fund, the Universities Superannuation Scheme (USS), reflecting an initial yield of 6.25 per cent, according the agents, Hamilton Osborne King.

Forestside, developed by Sainsbury's, has been the most dramatic retail and investment scheme of recent years. The completed scheme has Sainsbury's, Marks & Spencer and Dunnes as anchors, with 36 retail units.

According to HOK, letting of the retail units achieved initial Zone A rental levels of £120 per sq ft, with the later rentals achieving £160 - putting Forestside second only to Belfast's primary city centre shopping streets.

Forestside is set to be followed by the larger Harbour Exchange, an out-oftown shopping centre and retail warehousing complex on the eastern side of the city where building is about to start. Sainsbury's, DIY group B & Q, Warner Village Multiplex comprising Livingwell, Health and Fitness and the four-restaurant Family Entertainment Centre, are already committed. Sainsbury's will take 250,000 sq ft.

During the year, the commitment of the UK food multiples, Sainsbury's, Tesco and Safeway, to the North solidified and has begun to have a significant impact on the overall retail property market. All three retailers are actively pursuing suitable new sites and rebranding the businesses they have already acquired.

HOK director Colin Mathewson, who has acted in several of the major lettings, observed: "This greatly increased activity in the foodstore sector is establishing a rental pattern for this type of property that did not exist previously and is also acting as a catalyst for large-scale developments, with retail parks being developed in conjunction with foodstores."

This trend is reflected clearly in the experience in Newry, where cross-Border shopping has contributed to a major expansion in shopping centre/retail warehouse development. The Quays development in the former coal harbour, directly opposite the already successful Sugarcrane Centre, has already opened successfully with the 60,000 sq ft Sainsbury's store trading strongly. It is to be followed by a 50,000 sq ft Roches department store, a nine-screen multiplex and 26 retail units with surface parking for 1,100 cars.

The completion of the Quays is to be followed almost immediately by the Damolly Retail Park, just north of Newry, on the main A1 route north to Belfast. The Damolly Park will have about 135,000 sq ft of space and is also being developed by Sainsbury's and will be anchored by B & Q.

The North's office market is showing signs of growth with agents reporting increasing interest in new, high-spec buildings with floor plates of 5,000 to 8,000 sq ft. Rental levels remain little changed over recent years, with an expectation of lettings of more than £12 per sq ft being achieved during 1999.