Overall demand in the Northern Ireland commercial property market remained muted through the third quarter of the year according to the latest Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor, but looking beneath the surface, industrial property continues to outperform retail and office space, and the outlook for the sub-sector remains strong.
A net balance of 10% of surveyors in NI reported a rise in occupier demand for industrial space over the past three months, whilst a net balance of -10% of respondents noted a fall in demand for office space. Surveyors in NI report that occupier demand for retail space was flat.
On the investor demand side, a net balance of -18% of NI respondents reported a fall in overall investment enquiries, the fifth consecutive quarter that this balance has been in negative territory.
Investor demand for both office and retail space was reported to have declined with net balances of -33% and -44% respectively. Investor demand for industrial space continued to rise with a net balance of 25% of surveyors in NI reporting an increase, which is the highest balance seen in 2024.
Looking ahead, overall, respondents in NI remain cautious when it comes to capital values. A net balance of -7% of surveyors expect all-sector capital values to fall through the next quarter. A net balance of -20% of NI respondents anticipate that capital values for office and retail space will fall over the next three months. A net balance of 20% of surveyors expect capital values to rise in industrial space.
On 12-month capital value expectations, NI surveyors expect these to fall flat over the next year. Net balances of -25% and -23% of surveyors anticipate capital values to fall in retail and office space respectively. However a net balance of 45% expect capital values in industrial space to rise over the next year, which is the highest this balance has been since early 2022.
Looking at rental expectations for the next three months, a net balance of -3% of NI surveyors expect rents to fall at an all-sector level. Rents in both the office and retail sub-sectors are anticipated to fall through the next quarter (net balances of -20% in both subsectors). With regard to industrial space, rents in this sector are expected to rise, with a net balance of 30% expecting them to edge upwards through the next quarter, which, again, is the highest balance seen since early 2022.
Garrett O’Hare, RICS NI commercial property spokesperson and Managing Director of Bradley NI says: “While the data suggests a slow down in commercial activity in Northern Ireland overall during the last quarter, deals continue to be done where property is appropriately priced and located strategically to deliver on individual business objectives. A number of the larger multi-national retailers are actively seeking new opportunities for expansion, however, the obstacle to this is often the availability of suitable sites, planning delays and the relentless water infrastructure issues that have been reported on time and time again. Undoubtedly, the changes to UK taxation is creating a level of trepidation as businesses reconsider their approach into 2025 as well.”
Commenting on the UK picture, RICS Senior Economist, Tarrant Parsons, said: “The UK commercial property market continues to exhibit a relatively underwhelming performance, as some respondents cite a wait and see approach ahead of the first budget statement from the new Government.
“Despite the market being on tenterhooks for any new announcements, there are reasons to be more optimistic. An improving lending environment is likely to provide support to commercial real estate investment activity going forward, and headline capital value and rental growth expectations are also modestly positive for the coming twelve months, in keeping with the idea that the market has shifted into the early stages of an upturn.”