The commercial property market in Northern Ireland has had a relatively subdued start to the year 2024. The ongoing preference for remote work has continued to influence the market dynamics significantly. This trend was highlighted in a recent report released by the Royal Institution of Chartered Surveyors (RICS) which provides a detailed analysis of the property sector’s performance over the first quarter.
Sector-Specific Insights
While the general atmosphere in the commercial property market appears cautious, there are variances across different sectors:
Despite an overall subdued market, the industrial sector has proven to be resilient. According to the RICS Commercial Property Monitor, this sector remained a bright spot amid a cooling demand. Even though this quarter saw a stabilisation rather than growth in demand for industrial spaces, it marks a continuation of a previously strong performance streak across 15 consecutive quarters.
Retail and Office Spaces Struggle
In contrast, the market for retail spaces and offices faced more significant challenges. Both sectors experienced a decline in occupier demand, with office spaces seeing a notably steeper fall. This has been partly attributed to the shift in working patterns, with more individuals and companies continuing to embrace remote work.
Investor Interest Wanes
The report also highlighted a concerning trend of diminishing investor interest. For the third consecutive quarter, enquiries from potential investors have decreased. Both the office and retail sectors have been particularly hard-hit, with office spaces experiencing a sharper decline. Nonetheless, the industrial sector still saw an increase in investor demand, albeit at a slower pace than in previous quarters.
Future Financial Expectations
Surveyors reported a pessimistic outlook regarding the capital values across most sectors for the upcoming three months. Office spaces are expected to witness the sharpest decrease in values. However, there is a silver lining for the industrial sector, where capital values are anticipated to rise.
Rent Projections
The projections for rental values also reflect a sector-specific disparity. Rents for office and retail spaces are expected to decrease, aligning with the falling demand. Conversely, the industrial sector is likely to see an increase in rent, reinforcing its position as the strongest performer in the current market landscape.
Expert Commentary
Garrett O’Hare, RICS NI commercial property spokesperson and managing director at Bradley NI, expressed a cautious stance regarding the market’s outlook. He noted, “2023 was a turbulent year, so it’s unsurprising that surveyors remain cautious.” He pointed out that the commercial property sector faces challenges like adapting to remote working patterns and changing shopping habits.
O’Hare also highlighted the pressure on capital values and rents due to falling demand, coupled with rising finance and construction costs for new developments. Despite these challenges, he remains optimistic about the industrial sector.
Tarrant Parsons, RICS senior economist, added a broader perspective by noting that while the sentiment across the UK remains cautious, there are signs of recovery emerging.