Brexit drives slump in NI commercial property returns

Investors in the North’s commercial property market saw their “total returns” slump from 8 per cent to 1.7 per cent last year because of a slowdown in both income return and capital growth, new research shows.

Investors in the North fared much worse than their commercial property counterparts in Scotland who enjoyed a total return of 3.6 per cent and England – excluding London – where the average return was 4 per cent during 2018. The London commercial property market continued to outperform the rest of the UK, delivering a total return for investors of 7 per cent last year.

But Northern Ireland, according to the NI Commercial Property Investment Review 2018, produced in partnership by Ulster University, did do better than Wales where investors got a total return on their money of just 0.2 per cent.

The comprehensive review, which the university produced with global financial firm MSCI and the Royal Institution of Chartered Surveyors, shows that Northern Ireland’s commercial property investment market experienced a “marked slowdown” last year primarily because of two key factors: Brexit and the underperformance of the local retail property sector.

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Outperformer

But the review, published on Wednesday, also notes that the North’s office market was an outperformer, generating a total return of 12.3 per cent.

The Belfast office market delivered a total return of 12.4 per cent – comfortably above the UK average of just over 6 per cent and better than major cities such as London, Glasgow and Manchester.

Professor Alastair Adair, deputy vice chancellor at Ulster University, said Belfast's strong performance in the office market "reflects a new investment dynamic" in the city.

“The modern breed of IT and professional services occupiers are highlighting Belfast as a progressive, go-to and contemporary location offering investment opportunities comparable with and exceeding other European locations,” he added.