May 17, 2016
A chronic shortage of Grade A office space, especially those offering floor plates of over 10,000 sq ft in Belfast city means there is a growing acceptance in the market that Grade A rents need to continue to grow to encourage speculative development. This is due to the markets failure to provide suitable options within the City Core, finds the latest Belfast Offices Snapshot from Colliers. This lack of Grade A office stock Belfast has seen two well established Foreign Direct Investment companies (Allstate and Concentrix) bridge the gap from occupier to developer to secure their optimal property solution. However, the Belfast office market experienced a lower level of transactional activity in 2015 than expected. Take-up figures in 2015 totalled c.310,000 sq ft with the inclusion of the new c.100,000 sq ft Belfast City Council headquarters and therefore some way off the 2013 and 2014 take-up figures of 425,000 sq ft and 375,000 sq ft respectively.
The data suggests that the Belfast office market starting to mature in 2015, a trend that has continued into 2016. Landlords with Grade A buildings in prime core locations were able to command premium rental figures, continuing as the market differentiates between building locations, specifications and configurations, rather than there being a baseline accepted “rate” for a Grade A building. The first quarter of 2016 has started very strongly with take-up totaling 158,000 sq ft.
The scarcity of stock set against pent up and anticipated occupier demand, rising Grade A rental rates and the proposed reduction in Corporation Tax in April 2018 has resulting in a wider range of enquiries from local, GB and European based developers who see potential in the Belfast office sector, as illustrated by the submission of a number of planning applications.
This activity is further demonstrated by the level of developer interest in 4-5 Donegall Square South, Belfast, a prime and one of the last “on the square” office development sites. The subject is a c. 28,000 sq ft office building which could be refurbished but more likely demolished for a new c. 65,000 sq ft building.
Outside of the Allstate and Concentrix occupier led developments, Belfast Harbour’s 98,000 sq ft City Quays 2 development still remains the only speculative development likely to go on-site in 2016.