WHILE an upturn in Belfast's stagnant office market, in reaction to the peace process, is still awaited, the city's retail market is in the middle of its greatest boom.
Retail rental levels in Belfast's premier shopping street, Donegal Place, have passed Zone A levels in Dublin's Grafton Street, reaching prices of about £180 per square foot. Key money is also being paid for the first time in Belfast as retailers compete for prime pitches.
The rental levels in Donegal Place, Donegal Lane and Castle Place are also extraordinary because the pedestrian flows are just about half the equivalent flows in Grafton Street and Henry Street in Dublin.
The leading commercial agents in Belfast - Lisney, Osborne King Megran, and Lambert Smith Hampton - all reported great demand for prime retail pitches in Belfast prior to the Christmas shopping season.
Relatively high levels of available income - people in the North pay significantly less in housing and other costs than in the rest of the UK and Dublin - an increase in consumer confidence with the lasting ceasefires and exceptional levels of cross-Border shopping helped drive up retail expectation and rent levels.
The unprecedented rent levels were reached in the prime locations concentrated in Donegal Place, Donegal Lane and Royal Avenue, between the Castle Court Shopping Centre and Belfast City Hall. Some secondary streets, particularly Ann Street, also saw considerable rental growth in 1995, although some streets lost their traditional secondary status and were barely able to sustain anything other than the briefest lettings.
At the top end of the retail market, the Levi Store, and Schuh, the shoe retailers, were reported to have paid record rents. Levi, trading as Jeanster, is understood to have paid a Zone A rent equivalent to £180 per square foot, surpassing the average Zone A rent levels in Grafton Street of about £160 per square foot.
At the start of 1995, primary retail Belfast rents lagged behind Dublin, with the highest Zone A levels at about £140 per square foot.
Schuh is understood to have paid a Zone A rent equivalent to £170 per square foot and a premium of £100,000. Such premiums had not been heard of in recent times in Belfast.
The HMV record store also took a 12,500-square-foot letting in Donegal Arcade at a reported rent of £287,500, with fit-out costs understood to be about £1 million.
The principal secondary street, Ann Street, has seen Zone A rents increase from £40 to £70 during 1995, according to agents. The Dublin retail group, Pound City, is among the new tenants in the street, along with merchandise outlets for Manchester United, Liverpool and Glasgow Rangers soccer clubs. The regeneration of Ann Street began in 1994 with the location of a 30,000-square-foot development let to What Everyone Wants.
The Castle Court Shopping Centre, which was a major attraction for southern shoppers in 1995, is now completely let. The centre, built in 1990 with anchor tenants including Debenhams, Gap, Virgin Megastore and Laura Ashley, was acquired by MEPC in 1994 for £72 million. Footfalls in Castle Court were reported to have increased by 17 per cent in the year to 270,000 per week. One in eight cars parked in Castle Court's 1,600-space multi-storey car-park is southern registered.
Other significant retail investments in late 1995 were the purchase of the Connswater Shopping Centre, in east Belfast, by GUS Property for £23.25 million and Guinness Unit Pension Fund's £5 million acquisition of the Erneside Shopping Centre.
Most of the North's major shopping centres have been bought by investors, including major pension funds in the past three years. Scottish Widows received an initial yield of 5.57 per cent on its £2.9 million purchase of a prime retail site at 51-53 Donegal Place, Belfast.
Outside the city, an initial yield of 6.7 per cent was reported for Pillar Caisse Properties' purchase of the Fairhill Shopping Centre, in Ballymena, Co Antrim, for £11.5 million.
1996 will see the arrival of the British food giants. Tesco has sought planning permission for a 9,000-square-foot metro food store in the former AIB bank premises at 2 Royal Avenue, in the heart of Belfast's prime retail area.
There was considerable rivalry between the main British food multiples for the anchor position in the 54-acre "D5" site, owned by Belfast Harbour Commissioners, at Tillsburn, off the Sydenham by-pass, in east Belfast.
The developer chosen by the Harbour Commissioners is a group consisting of a locally-led development company, Aquis, and Anglia General. Permission is being sought for a 600,000-square-foot shopping centre on the site, with a 65,000-square-foot supermarket as anchor.
One local agent put the "D5" site in perspective, saying it would contain as much retail space as all the shops in the nearby town of Lisburn.
Sainsbury, which has already bought the Supermac supermarket site in south Belfast for an estimated £20 million, is expected to invest around £100 million in at least seven supermarkets. It has applications for sites in Coleraine, Derry, Newry and at the Sprucefield roundabout, where the main Dublin-to-Belfast A1 meets the M1 motorway.
By contrast with the burgeoning retail market, office rentals have remained at around £10 per square foot for prime space for some years. The Valuations and Lands Agency's recent report on the Belfast office market says there has been no rental growth for two years.
However, following the ceasefires, the agency says there has been a "noticeable increase in interest in both the investment and development markets from sources which would have viewed, Belfast with, at best, some reservation".
Its office report adds: "Given the long lead-in period, which is the norm in property transactions, we will not know for a considerable time whether all this attention results in either additional investment or development."
The report found that while there is 59,000 square metres of office space available in the city, only 8,563 square metres is new generation - mostly in 1,000-square-metre units.
The most recent letting success in the city centre was at Harvester House, in Adelaide Street, where the Northern Bank took 13,500 square feet of space at a rental of £10 per square foot.
Earlier in the year, developers Ewart PLC attracted British Telecom as a tenant for its entire 150,000-square-foot office tower in the 15-acre Laganbank site. The Hilton hotel group is locating near the city's £29 million opera house, which opens next year.
The Laganside Corporation has recorded considerable success in lettings at Clarendon Dock, where the Council for Curriculum Examinations and Assessment is locating its 50,000-square-foot headquarters.
However, the main office agents report remaining hesitancy on the part of both office developers and tenants. Developers, according to agents, are seeking pre-lettings before going on site. Uncertainty in the office market, partly due to the rapid technological changes allowing increased tele-work from home, is also curtailing development and holding down rental levels.
The ceasefires are expected to stimulate the local hotel market. Surveys have suggested a shortfall of between 10,000 and 15,000 beds in the local hotel and B & B market.
