Property investment in Northern Ireland exceeded £334 million (€390 million) in 2023, which was the highest annual turnover since 2017 and well above the five-year average of £262 million, according to a new report from Savills Northern Ireland.
The report described the figures was “encouraging” in the face of “significant market headwinds” experienced throughout the course of last year, which included high levels of inflation, high interest rates and elevated investor caution.
Retail was the mainstay of the market with a total investment volume of £214.2 million, representing a market share of 64 per cent.
Elsewhere, office values continued to decrease over the year, although demand remained for prime offices with strong ESG credentials, although the report noted there is a lack of supply of these assets.
In the industrial and logistics segment of the market, £28.3 million in assets were traded. Although the sector accounted for the smallest share of activity, this was reflective of the insufficient level of stock available as opposed to a lack of demand.
Private local investors were the most active buyer type. This reflected the fact Northern Ireland’s commercial property investment landscape has changed dramatically since the UK’s referendum on EU membership in 2016.
Prior to this, institutional investors accounted for a significant volume of transactions in any given year. After Brexit, UK institutional investment ground to a halt as investors took to the sidelines amid the ensuing political turmoil.
While institutional investors “remain unconvinced” this turmoil is over, the resultant void has been filled by property companies, high net worth individuals and private equity investors who have identified better yields when compared to the British or Irish markets.
Meanwhile, the Belfast office market recorded take-up of 261,500sq ft across 53 deals, with the volume of space demanded declining even as the number of deals remained constant.
Savills Northern Ireland head Ben Turtle said the year will be remembered for its “stubbornly high levels of inflation, interest rates at a 15-year high and elevated investor caution”.
“Despite this, investment volumes reached a six-year peak, with the market enjoying its best year since 2017,” he said.
“This year, we expect a further pickup in activity as a number of refinancing events emerge. These have the potential to unlock acquisition opportunities for investors, which would generate additional transaction activity.
“In the office market, we expect take-up to increase in 2024 as deals which were pushed out last year are completed and market requirements continue to be fulfilled.
“As such, we predict that headline rents for new Grade A stock will rise from £25-27 per square foot currently to £30 within the next 24 months.”
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