This was an encouraging result despite the 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%.

While Savills £46.5 million sale of Rushmere Shopping Centre and Retail Park was the largest transaction within the sector, other notable transactions included Savills’ sales of Forestside Shopping Centre, Belfast, to a private local investor, Foyleside Shopping Centre, Derry / Londonderry, to a local property company for £27.0 million and Riverside Retail Park, Coleraine, to Magmel Properties for £10.3 million.

Elsewhere, office values continued to decrease over the year, although demand remained for prime offices with strong ESG credentials – albeit there is a lack of supply of these assets. In the industrial and logistics segment of the market, £28.3 million in assets 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 in 2023. This reflects the fact that NI’s commercial real estate 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 that 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 on NI real estate when compared to the GB or ROI markets.

In terms of the occupier markets, the retail sector welcomed a number of new tenants; at CastleCourt, New Look moved into the former Debenham’s box, taking 8,000 sq ft. At Victoria Square, The White Company and Slims Chicken moved in, while Rituals upsized to a 3,500 sq ft unit. Meanwhile, the Belfast office market recorded take-up of 261,500 sq ft across 53 deals, with the volume of space demanded declining even as the number of deals remained constant.

The largest deal of the year was the leasing of 27,600 sq ft by a confidential tech company within City Quays 3. Take-up in the industrial and logistics sector totalled 744,900 sq ft, with the letting of 204,200 sq ft at Nutts Corner Business Park, Crumlin, representing the biggest deal of the year. We are observing particular demand for space which is in close proximity to Belfast and along the corridor between Belfast and Dublin.

Ben Turtle, Head of Savills NI, commented:

“2023 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. 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.” 

ESG will continue to dominate investor and occupier considerations in 2024. Investing in green buildings now will save on the future cost of selling an asset at a discounted price or engaging in expensive retrofitting work on older stock in an attempt to maintain competitiveness. One of the main barriers to upgrading standing stock is the high cost of construction. ESG retrofits may thus be delayed or scaled back, leaving those assets that do not meet environmental targets increasingly marginalised. As such, landlords will have to invest substantial capital to meet these ESG requirements and remain relevant. Ben continued:

“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 £25.00-£27.00 psf currently to £30.00 psf within the next 24 months.”