Expectations for the commercial property market in Northern Ireland improved as overall demand from occupiers increased for the first time in almost two years, according to the Q1 2025 Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor.
A net balance of 6% of NI respondents reported a rise in overall occupier demand, with both office and industrial space seeing an increase. The last time this net balance was in positive territory was Q2 2023. A net balance of 6% saw a rise in office space and a net balance of 25% in industrial.
In line with this overall improvement in demand, respondents expect rents to increase in the short-term. A net balance of 17% expect rents to rise at an all-sector level over the next three months, which is the highest this balance has been since 2018. Rents in both the office and industrial sub-sectors are anticipated to rise through the next quarter (net balances of 6% and 56% respectively).
Respondents report a less positive picture in the investor market. Investor demand was marginally lower in Q1 according to respondents, with a net balance of -4% reporting a decline. However, this represented an improvement compared to the corresponding quarter of 2024 (-12%). Looking at the subsectors, industrial space was the only one to see a rise in investor demand, with a net balance of 25% reporting an increase. Both retail and office space saw declines in investor demand, with net balances of -25% and -13% respectively.
When it comes to capital value expectations, respondents remain cautious in the short-term. A net balance of -7% of NI surveyors expects capital values to fall over the next three months. Looking at the subsectors, capital values for office and retail space are expected to decline (both seeing net balances of -33%). The industrial sector continues to outperform the other subsectors, as a net balance of 47% of NI respondents anticipate capital values for this space will rise in the three months ahead.
Whilst surveyors are hesitant overall on the short-term outlook, they are more optimistic on the 12-month horizon. A net balance of 14% of NI respondents expects capital values to rise over the next year at all sector level, the highest this balance has been in three years. Looking at the subsectors, capital values for office space are expected to rise for the first time since late 2021, albeit marginally so (a net balance of 5%). A net balance of 50% of respondents expects a rise for industrial space, however a net balance of -13% expect a fall in retail space.
Garrett O’Hare, RICS NI commercial property spokesperson and Managing Director of Bradley NI says: “The commercial property market in Northern Ireland continued to face challenges with a variety of highs and lows depending on the asset class and location. The industrial sector continues to outperform the other subsectors, with demand continuing to outweigh supply, albeit demand has eased back somewhat since the influx of occupiers on the back of Brexit. It’s encouraging to see that retail is showing some signs of improvement with increased occupier demand in high footfall locations, but with rents remaining relatively low. The prime office market with larger floor areas remains under pressure, while small spaces and serviced offerings remain attractive due to their flexibility and cost effectiveness. Whilst it’s promising to see that surveyors are more optimistic on the overall outlook of the commercial property sectors, there are still many obstacles in the way.”
Commenting on the UK picture, RICS Chief Economist, Simon Rubinsohn, said: “Despite the turbulence engulfing the geo-political environment following President Trump’s tariff announcement at the start of April, feedback to the latest RICS was steady with the headline investment enquiries metric returning to positive territory, albeit modestly, for the first time since the second quarter of 2022.
“Longer term indicators, while generally constructive, continue to reflect the likely headwinds facing the real estate market over the next twelve months. Aside from the challenges linked to the global economy, concerns around domestic issues including the impact of the uplift in NI contributions are seen as likely weighing on occupier demand.
“Meanwhile the bifurcation in the office sector remains very visible in the latest results with the outlook for prime space seemingly improving as sentiment around secondary offices remains deeply negative.”