DOWNTURN IN RETAIL SECTOR INTENSIFIES WHILE OFFICE AND INDUSTRIAL SECTORS BRIGHTER

Occupier demand for retail property in Northern Ireland fell in the second quarter of 2018 as the sector continues to come under pressure, according to the latest RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Commercial Market Survey.

Demand from both tenants and investors for retail property continued to go lower according the balance of respondents to the survey, with sentiment at its lowest level in over six years. And contributors to the survey anticipate a further fall in retail occupier demand, in line with the trend across the rest of the UK.

Retail saw the weakest occupier demand since March 2012 (a net balance of -50% said that occupier demand in the sector fell) and investment enquiries saw the biggest drop since December 2011 (a net balance of -33%).

However, the office and industrial sectors are considerably more upbeat according to the survey.

In the both sectors there were rises in occupier demand, three-month rent expectations, and three-month capital value expectations.

Enquiries from both UK and foreign investors were down at an all-sector level. However, the picture regarding investment enquiries was less downbeat for industrial and office property than it was for retail.

Andy Tough, chair of RICS in Northern Ireland, said: “It’s certainly a challenging time for the retail sector in Northern Ireland, as it is across the UK, with consumer confidence weak and retail footfall under pressure. The challenges being faced by the sector, not surprisingly, come through in the latest set of survey results. But it’s certainly not all bad news in the commercial market, with some bright spots in the industrial and office sectors. Both sectors remain fairly robust in terms of rent expectations and capital value expectations for the next quarter. Indications from the survey that the availability of office accommodation is increasing will also provide positive news for many, particularly in relation to efforts to attract further inward investors.”

Gary Barr, Relationship Director, Commercial Real Estate, Ulster Bank said: “Rising demand in the office and, to a lesser extent, the industrial sectors is encouraging. Despite the evident challenges for the retail market we continue to support a wide range of property deals and see firm demand from investors for quality assets.”

The main findings of the survey were:

  • A net balance of -2% of respondents reported overall occupier demand being down in the second quarter of 2018. Office demand was up according to a net balance of 36% of respondents and a net balance of 7% of respondents reported an increase in demand for industrial premises. The balance of retail respondents reporting that demand fell increased (-50).
  • The net balance for 3 month-rent expectations was +10%, meaning that 10% more surveyors expect rents to rise rather than fall. A net balance of 43% of respondents said that they expected office rents to rise, whilst a net balance of 21% expected industrial rents to rise. The balance of respondents (-36%) expect retail rents to be lower in three months’ time.
  • Investment enquiries fell in the office (-8%) and retail sectors (-33%) but industrial enquiries rose (a net balance of +25%).
  • The net balance for the 3-month capital value expectations was +8%. Office and industrial expectations rose (+25% and 17%) respectively while retail expectations fell (a net balance of -17%).
  • Meanwhile the net balance for foreign investment enquiries (-21%) was in negative territory overall. Office and retail sectors both saw a fall (-18%) in enquiries while enquiries in the industrial sector were also down according to the net balance of respondents (-27%).