Southern Irish investors fell out of the Northern Ireland market last year, accounting for only around 5 per cent of deals after several years of high-spending in the market, according to a report by agents Lambert Smith Hampton.
The main reason for the Southern withdrawal was the strength of sterling rather than any uneasiness about the market. As the Dublin-based investors withdrew, British investors stepped in, accounting for 40 per cent of deals.
Northern investors accounted for an estimated 55 per cent of the total £350 million sterling of investment transactions during 2000. A consortium of Northern investors who were responsible for some of the largest shopping centre transactions in recent years pulled off the largest single investment of £70 million for the Forestside shopping centre in south Belfast.
Mr Paddy Brennan, of Lambert Smith Hampton, said the "pulling back" of Southern investors was "largely due to the weak position of the punt in relation to sterling". He added: "While keen to buy, many (Southern investors) have put their requirements on hold, waiting for currency levels to return to similar levels as a year ago. Demand, however, continues to outstrip supply due to the lack of quality opportunities available in the market place."
Yields in the retail sector increased by 0.5 per cent during the year. Prime retail rentals, which were 6 per cent in 1999, rose to 6.5 per cent. Prime new office buildings reflect a yield ranging from 6.5 to 7 per cent. Industrial warehousing is reflecting around 7 per cent.
Mr Brennan added: "More than ever, UK-based investors, who in the past would have seen Northern Ireland as a risky area, are examining Northern Ireland as a viable investment location. Opinions are slowly but surely changing and an increased level of activity is expected in the future. Many UK-based investors were of the opinion that the market was too "hot", but now they appreciate the tremendous opportunities for rental growth, particularly in the office, industrial warehouse and retail warehouse sectors."
Supply of stock remained low. Property owners were failing to identify re-investment opportunities. Continued economic growth and low borrowing rates were leading owners to hold on to their investments. The supply of smaller investments remained static with few major investments coming to the market.
During the year, the office market again achieved records in Belfast. Mr Jago Brett, of Lambert Smith Hampton, estimated the take-up for 2000 to be around 725,000 sq ft. This compared with around 490,000 sq ft in 1999, itself a record.
The headline rent of 2000 was achieved for Dunloe Ewart's 9 Lanyon Place, with a letting of just over half of the 150,000-sq-ft building on a key site in the Laganside development area to Fujitsu. The other major letting of the year was 67,500 sq ft of accommodation at Mays Meadows, a development by another Southern-based company, PricewaterhouseCoopers.
Mr Brett estimated that 80 per cent of lettings were to the private sector, another signal of improvement, as until the mid1990s, almost all office take-up was by Government. He said: "There is a healthy level of current inquiries which would indicate excellent prospects for 2001 and beyond with in excess of 300,000 sq ft of inquiries currently circulating in the market from both local occupiers and inward investors."
The stock of new-build and refurbished accommodation is put at around 485,000 sq ft with a further 215,000 sq ft due to start off site during the year. Mr Brett said: "While there are a number of sites with planning consent in addition to this, market forces are likely to ensure that there is no oversupply of stock which would depress future rental growth."
He pointed out that Dunloe Ewart had applied for planning permission for 635,000 sq ft of office accommodation for its 16-acre site on the east bank of the Lagan in the former Howden Sirocco site. There was also the prospect of development on the 100-acre site at Ballyhenry International Business Park.
