Real estate investment spend predicted to spectacularly outperform 2021

Published on 13th April 2021

Commercial real estate agency CBRE NI has said it expects to see much healthier real estate investment spend in Northern Ireland in 2021, which they expect to spectacularly outperform 2020 levels.

Investment activity in Northern Ireland during 2020 was limited due to obvious challenges presented by Covid-19. The yearly investment total was £136 million – a decrease of 36% from 2019 – which reflected those challenges.

However, recent research on the volume and value of investment transactions in Q1 2021 carried out by CBRE NI shows that investment spend in the first quarter of the year alone was £126m, which reflects 93% of the total spend in 2020 and 59% of 2019.

The research also showed that 69% of the total spend so far in 2021 came from international investors, while a further 27% came from investors based in GB.

The most significant deal in the first quarter was undoubtedly the recent sale of Merchant Square in Belfast city centre, which was sold to a Middle Eastern investment fund for £87m in what is the largest ever office deal recorded in Northern Ireland.

Gavin Elliott, Director at CBRE NI, commented: “The Merchant Square sale has provided a real injection of confidence in the local commercial real estate sector. It is fantastic news for the office investment market in Belfast particularly, as well as the future of the city as it continues to evolve as a major global fintech hub. The price reflects a net initial yield of sub 5.25% which is a new base for the Belfast office market.”

Other notable investments include Balloo Retail Park in Bangor to Supermarket Income REIT for £24.8m and Kilroot Business Park in Carrickfergus to Wallop Estates for £9.35m.

Commenting on the overall prospects for the Northern Ireland investment market, Mr. Elliott said that CBRE NI is optimistic about overall investment levels in 2021 with Q1 delivering a very strong result considering the fact that the market has been on full lockdown for the entire quarter and pretty much all of the previous year.

“While real estate on the whole is not immune from wider economic and market forces, as an asset class it continues to offer relatively stable income and capital appreciation, which is attractive to investors at this time, especially given the current low interest rate environment,” he added.

“We expect to see steady levels of investment continue across 2021, but particularly in the second half of the year, by which time the roll-out of the Covid-19 vaccination programme will have allowed more investors to travel to inspect buildings and conduct due diligence.

“Given that we have already secured almost as much as the 2020 investment total in Q1 alone, we are expecting that transaction volumes will have doubled or tripled by the end of 2021.”

Speaking recently at the virtual CBRE NI Real Estate Market Outlook event for 2021, Spencer Levy, Chairman of Americas Research and Senior Economic Advisor at CBRE, predicted that Belfast was well-positioned to capture success in the real estate sector.

He said that Belfast was in a unique position to take advantage of pent-up demand and high levels of liquidity in the commercial real estate sector.

He added that pent-up consumer demand and strong capital markets liquidity bodes well for real estate investment across the globe, and that Belfast was well placed to reap the benefits of the coming rebound.