Monday 23 September 2019

Northern Ireland awaits €1.46bn in new property investment

One Bankmore Square, which will replace the Movie House on Dublin Road, will be 250,000 sq ft over 12 storeys
One Bankmore Square, which will replace the Movie House on Dublin Road, will be 250,000 sq ft over 12 storeys
Donal Buckley

Donal Buckley

An international campaign to entice investors to back major property developments in Belfast was launched recently by the British government in conjunction with Invest Northern Ireland. They are focusing on seven projects with the potential to provide Stg£1.3bn (€1.46bn) worth of property.

The launch comes at a time when demand is increasing among financial services and professional services firms for office accommodation while tourism growth is boosting demand for Belfast hotel rooms.

The largest of the seven projects is a Stg£365m (€409m) development at the Titanic Quarter, which would include film production facilities, 2,000 residential units and offices.

Initiated by Donegal man Pat Doherty of Harcourt Developments, the Titanic Quarter is the site of one of Europe's largest urban waterfront regeneration projects and last year Titanic Belfast was named the world's leading tourism attraction. 'Game of Thrones' is also filmed there. More than 100 investors, businesses and education institutions including Citi and Microsoft are located in the quarter.

Titanic Quarter Limited, the development company, is now offering investors a choice of opportunities from Stg£25m; upwards including: Grade A offices at North Yard to be worth Stg£25m; or the Financial Services Campus, Stg£50m; Titanic Studios accommodating studios and post production facilities worth Stg£30m; Platers Yard Hotel, Stg£35m as well as 2,000 apartments.

The British government's Department of International Trade (DIT), points out that full and outline permission for the next 280,000 sq m of mixed-use development for Titanic Quarter is in place and is ready for investment. The types of funding to be considered includes traditional funding, equity, joint venture and development Funding.

Simon McEvoy of Savills reckons that there is latent demand for about 750,000 sq ft of offices in the Belfast market at present.

Robert Toland of agents DTZ McCombe Pierce, says that despite the demand, developers find that banks are reluctant to provide funds for speculative development and hence the push at government level to attract investors.

"Furthermore there have been very few pre-letting deals," he adds.

The timing of the campaign also looks good in terms of rental trends. In 2015 office rents were as low as Stg£14 (€15.70) per sq ft. but they are now over Stg£20 (€22.40) per sq ft.

"For a pre-let you would need rents of Stg£20 to Stg£21 per sq ft." Toland adds.

McEvoy says that rents have now reached around Stg£23 per sq ft which make it viable to undertake speculative development.

Of the seven projects being promoted by DIT, three will be developed by Northern Ireland developer McAleer & Rushe, which has a strong track record in both the Republic of Ireland and in Britain. Its three projects will have a combined 67,400 sq m of hotel, offices and residential accommodation worth up to Stg£175m.

The largest of its three is a Stg£92m hotel, offices and residential project with floor area of 37,000 sq m at Corporation St and Tomb St, including a 250 bedroom hotel, 17,000 sq m of offices and 92 apartments.

It also plans a Stg£54m development at Norwich Union House, Fountain Street, which includes a 122-bedroom hotel and ground floor retail that is expected to see construction in 2019. McAleer is also ready to start work on a Stg£30m office development at Baptist Church, 32/36 Great Victoria St, with a floor area of c. 12,500 sq m.

Another developer Richland Group, already has negotiated finance options for equity, senior debt and mezzanine funding but is availing of the government campaign to explore further funding options for a Stg£65m office development known as One Bankmore Square, which will replace the Movie House on Dublin Road and extend to 250,000 sq ft over 12 storeys. Savills, who are joint agents on the project, are quoting rents of around Stg£25 per sq ft.

Richland is headed by Co Tyrone developer Gary McCausland, who also has properties in London and Paris.

On Laganside, promoter Swinford (Sirocco) Ltd is seeking backing for a Stg£465m development of offices, hotel, residential, retail and leisure with total floor area of 130,000 sq m at Sirocco Quays. It intends to lodge the planning application before the end of the year.

At Weavers Cross, Translink, the Northern Ireland railway operator, is seeking equity or other funding for a Stg£250m office, hotel and residential project extending to 125,000 sq m. The firm submitted its planning application for a transport hub for the site last June.

McEvoy says Q3 saw 91,557 sq ft of offices taken in 19 deals, bringing the total to 257,029 sq ft in the first nine months and sets the market on target to exceed last years' record breaking take up of 435,000 sq ft.

Recent deals include the largest pre-let on recent record with HM Revenue and Customs taking 104,220 sq. ft. of offices at Erskine House on a 25-year lease. Savills acted for landlords Orby Investment Ltd.

Belfast Harbour Commissioners, which is involved in Titanic Quarter, has undertaken a speculative office development known as City Quays 1 which extends to 60,000 sq ft and City Quays 2 which will extend to 100,000 sq ft. The latter is already 50pc pre-let.

Among the firms interested in taking Belfast office space are Deloitte, Citi Group, and First Trust which is the Northern Ireland subsidiary of AIB. PwC is also planning ahead for a 150,000 sq ft requirement in 2020.

Declan Flynn, managing director of Lisney Northern Ireland, says that after a relatively quiet start to the year, investment deals jumped significantly in the third quarter of this year.

"With deals totalling Stg£199m during the period, this places the market well on course for Stg£300m for the full year," he adds.

The figure was boosted significantly by the Stg£123m purchase of CastleCourt Shopping Centre on Belfast's Royal Avenue by Wirefox, led by BJ Eastwood, grandson of the boxing promoter Barney Eastwood.

Castlecourt, which is the third-largest shopping centre in Northern Ireland with 340,000 square feet of space, comprises more than 100 retailers. Anchored by Debenhams, it boasts an annual footfall of more than 12.5 million, and the city's largest car park, with 1,600 spaces. Other retailers there include popular outlets such as, Boots, Argos, Vodafone, Toys 'R' Us, Dorothy Perkins, Jack & Jones and Costa.

Outside of Wirefox's acquisition of the shopping centre. BJ Eastwood is also planning a 155,000 sq ft office project which has been branded as Paper Exchange.

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