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Overall demand from occupiers for Northern Ireland commercial property was flat through the last quarter of 2024 according to the latest Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor.
In contrast to office and retail, though, activity in the industrial sector continues to be strong, with surveyors remaining optimistic about its prospects.
Whilst overall occupier demand fell flat, a net balance of 23% of surveyors in NI reported a rise in occupier demand for industrial space over the past three months, up from 10% in Q3 2024. A net balance of -21% of respondents noted a fall in demand for office space, and a net balance of -7% reported a fall in demand for retail space.
Following a similar pattern to the occupier market, investor demand also fell flat according to NI respondents. Looking at the subsectors, industrial space was the only space to see a rise in investor demand with a net balance of 33% reporting an increase. Both retail and office space saw declines in investor demand, -18% and -17% respectively.
Looking ahead, respondents in NI remain cautious overall when it comes to capital values. A net balance of -6% of surveyors expect all-sector capital values to fall through the first quarter of 2025. Over the first quarter of the year, a net balance of -46% of NI respondents anticipate that capital values for office space will fall and a net balance of -23% expect capital values for retail space will decline. A net balance of 50% of surveyors expect capital values to rise in industrial space.
On 12-month horizon, NI surveyors expect capital values to fall, with a net balance of -12% expecting a decline at all sector level – the lowest balance seen across all UK regions. Net balances of -33% and -36% of surveyors anticipate capital values to fall in retail and office space respectively. However, a net balance of 33% expect capital values in industrial space to rise over the next year.
Looking at rental expectations for the next three months, a net balance of -1% of NI surveyors expect rents to fall at an all-sector level. Rents in both the office and retail sub-sectors are anticipated to fall through the first three months of 2025 (net balances of -21% in both subsectors).
With regard to industrial space, rents are expected to rise, with a net balance of 38% expecting them to edge upwards through the next quarter which is the highest balance seen since 2022.
Garrett O’Hare, RICS NI commercial property spokesperson and managing director of Bradley NI says: “The commercial property market in Northern Ireland continued to face challenges throughout 2024. High interest rates, the UK general election and impending Minimum Energy Efficiency Standard (MEES) rules all played a part in a milder commercial market over the course of the year.
“In saying that, falling inflation and reduced interest rates may increase appetite for investment in the months ahead. The industrial sector remains the prized asset in the commercial class, with demand continuing to outweigh supply, and it’s encouraging to see surveyors anticipating this to continue through the early parts of 2025. While transactions for retail space have been low, the changing hands of a number of retail schemes and shopping centres may revitalise the sector if the correct approach is adopted to revitalising their offering.”
Commenting on the UK picture, RICS head of market analytics, Tarrant Parsons, says: “The closing quarter of 2024 saw sentiment in the UK Commercial Property market soften a little, with bond market uncertainty impacting credit conditions and investment. This has not however soured long-term confidence in the market. Prime industrial and office assets continue to demonstrate resilience, and the gap between modern, energy-efficient commercial property and the rest expanded again.
“According to some of our respondents, rising rents are enabling developers to refit and improve their properties in what is a competitive prime market. Many are employing a ‘wait and see’ attitude towards the commercial property sector and the impact of the government’s policy package, reflected in a flatter outlook this past quarter. The latest announcements by the Chancellor should help support confidence in the real estate sector.”
