FURTHER growth in Northern Ireland's hotel sector, which has seen dramatic improvement in the past two years, will depend on the outcome of political negotiations to reinstate the IRA ceasefire, it is predicted.

The week-long loyalist internal blockade during the Drumcree crisis and the return of republican bombings have already curtailed the flow of speculative, hotel investment in the North.

During the 18 months prior to the IRA calling off its ceasefire, hotel investment had been one of the most active areas of commercial development in the North.

While the largest of the developments are continuing, as many as five projects are now reported to have been temporarily shelved while the North awaits the outcome of the latest peace talks. The suspended projects are all outside Belfast.

In Belfast, work has started on the Hilton group's £21 million sterling hotel beside the city's centrepiece concert hall on the riverside Lanyon Place site. The hotel is due to open in 1998. Work is well advanced on Jury's £9.4 million hotel in Fisherwick Place and it is due to open next summer.

The local Andras House property group has advanced work on two Holiday Inn projects to follow its successful Holiday Inn Express, developed at a cost of £4 million, in Brunswick Street in central Belfast. The two projects are on out-of-town sites - one at Shaws Bridge, south of Belfast, the other near Larne, Co Antrim. The development costs of the two new Holiday Inn projects are put at between £10 million and £12 million each.

The two years of hotel development in Belfast has increased the bedroom capacity by 50 per cent to 1,800 rooms. However, a recent report on the prospects for the North's leisure sector noted the impact that the summer's disturbances had on inward investment. The blockading of roads by loyalists and the bombing of the Killyhevlin Hotel in Fermanagh during July had resulted in a number of projects being shelved, the report by Kenneth Crothers, Deane & Curry, observed.

The senior surveyor in the company, Nicholas Rose noted: "The breakdown in the IRA ceasefire and the bombing of the Killyhevlin Hotel in Enniskillen have done little for tourist confidence. But the consensus among hotel clients seems to be that unless the political situation deteriorates, the industry will return to the more modest rates of growth seen over the last decade.

"We envisage a period of consolidation in the hotel industry in the province following the current wave of development activity, which is likely to satisfy existing demand.

"While there is scope for new accommodation in the budget hotel sector, we consider that a number of proposed schemes, particularly outside Belfast, will probably not go ahead for the time being due to their reliance on the tourist trade."

Some hotel and many B & B operators in the North reported 50 per cent drops in trade since the summer's disturbances. However, the civil strife has not significantly dampened enthusiasm in the retail sector.

The record rental levels in central Belfast reached last Christmas have fallen slightly but appear to be consolidating at levels well above previous years.

Zone A rentals in Belfast's prime shopping streets, which reached peaks of over £180 during the rush for top pitches last Christmas, have settled at around £165. Rentals for these pitches two years ago were between £80 and £120.

Osborne King Megran (OKM) report that the lack of available sites is the only thing holding back another rise in rental levels. There have been no units available in the Castle Court shopping centre for 18 months.

OKM reported a lull in retail interest during the disturbances of the summer but retailers, including some from the Republic, have been showing interest during the autumn.

The increase in retail rentals also moved outside Belfast during the year. Rental levels for prime Zone A pitches in Lisburn's Bow Street are now put at £89 compared with levels of £66 two year ago.

Rents at the Bloomfield Shopping Centre, in Bangor, Co Down, are expected to rise by 50 per cent when the centre's rent review comes up next year.

There is still uncertainty about how the massive increase in out-of-town retailing will effect city and town centre rentals. The North is undergoing an unprecedented boom in supermarket development with the British giants, Sainsbury and Tesco, currently building nine major new supermarkets.

Sainsbury is spending more than £100 million in Northern Ireland. It is building, new supermarkets at Ballymena (33,000 square feet); sout-east Belfast (38,000 square feet); Coleraine, Co Derry, (28,000); Derry (33,000 square feet) and Newry (14,000 square feet). Sainsbury is due to lodge an application for another store at Sprucefield, on the A1-M1 intersection outside Lisburn, Co Antrim.

Tesco is already trading successfully from its Metro Store, in Royal Avenue, Belfast, where it developed a 12,500-square-foot supermarket in the former Ulster Bank building. It also intends opening a 50,000-square-foot centre at Knocknagoney, east of Belfast, and a 33,500-square-foot store at Lisburn.

Another international multiple, the Sears Group, is proposing a £30 million retail and leisure development on a 50-acre site at Crescent Link, outside Derry city. The plans involve a 135,000-square-foot retail element.

Agents Lambert Smith Hampton recently proposed that the tax incentives which kick-started development in Dublin city centre should be applied to secondary and tertiary areas of Belfast city centre.

Keith Shiels of the agency cited the success of the Jervis Street centre in Dublin and said: "We should learn from this and it would have a particular application in the northside area of Belfast where plans for development are still on the drawing board.

"Castle Court received major incentives and is now a success story but more is needed if areas such as North Street and Donegall Street are to receive a lift."

Few agents report any significant uplift in the office and industrial sector. The lack of speculative building in the office sector and resistance on the part of tenants to commit before developments are completed are cited as continuing reasons for the lack of movement.