Government cost cutting has put an end to public-sector demand, but the private sector has yet to step in to fill the vacuum. Anita Howarth asks where this leaves Belfast’s office sector.
Belfast’s office market is being weaned – but the lack of alternative nourishment is making it an uncomfortable experience. For years the city fed on public-sector demand, which in turn translated into development. Now this demand has all but dried up and local agents don’t know what will replace it. It is hardly surprising, then, that developers are holding out for prelets before building anything.
The Valuation and Lands Agency (VLA) estimates that 47% of all office space in Belfast is occupied by the public sector, with only 20% – 1m sq ft (92,900m2) – occupied by financial services. But government cost cutting and efficiency drives have put a check on new public-sector requirements.
According to Lisney’s David McNellis, private-tenant demand is lacking: “It is unusual to get a private-sector requirement in excess of 10,000 sq ft (929m2).” However, Northern Bank is rumoured to be bucking the trend with a 25,000 sq ft (2,323m2) requirement. And Lambert Smith Hampton has a 10,000 sq ft (929m2) requirement on its books.
But McNellis cautions against over-hyping requirements like this: “There is probably not much demand for units of that size. And few requirements are new. Most have been sitting there for some length of time. One requirement has been circulating for six to eight months and we are only now getting to grips with one proposal.” He also finds it difficult to see such requirements coming from Northern Ireland.
Company relocations must therefore be the main source of large space users. To this end, the European Union offers substantial grants but, as yet, results on the office front have been disappointing. McNellis puts this in context: “We are experiencing the knock-on effects of mainland companies not wanting any more acquisitions. Only in an improved economic climate will funds be released for new space.”
But Colin Mathewson of Osborne King & Megran is more upbeat, although somewhat less specific: “Until six months ago, there wasn’t any demand for space. It is only recently that this demand has become apparent. Soon, tenants are going to realise that the only way they are going to get new space is if they build it.”
The difficulty, as Michael Hopkins of McKibbin & Co points out, is that developers are becoming nervous as demand from the public sector dries up. The result is that there has been no speculative development in the prime core since the high-specification Harvester House was built in 1991. Now, according to letting agent Lisney Commercial Property Consultants, the final 2,300 sq ft (214m2) in the 23,310 sq ft (2,164m2) Harvester Properties scheme is under offer to a financial institution.
Harvester’s nearest competition will be at 21 Linenhall, where Anglia & General Developments is refurbishing 25,500 sq ft (2,369m2). McCombe Pierce & Partners will be asking for rents in the region of £10.50 per sq ft (£113.02 per m2), although it is unclear what incentives will be given. MP’s Michael Pierce says: “We hope to let the space to a single tenant, but it is a flexible building so we can divide it into smaller units if need be.” Other agents are sceptical as to whether refurbished space can command these rents when the 2,300 sq ft (214m2) under offer at Harvester House breaks back to £10 per sq ft (£107.64 per m2).
Belfast prime core lies south and south-west of the City Hall. A VLA report argues: “For reasons of convenience, these [areas] are likely to remain highly attractive to office occupiers. They are, however, being challenged by sites such as Clarendon Dock and Laganbank.” Strong marketing and good on-site parking could work in favour of both these sites, which fall under the remit of Laganside Corporation.
At the 15 acre (6.07ha) Laganbank, Ewart Developments has attracted BT, which is forward purchasing a 150,000 sq ft (13,935m2) office tower for its own use. This will be built next to the £29m concert hall and conference centre which is being funded by the city council supported by the EU and Laganside Corporation.
In addition, Ladbroke and Ewart are to develop jointly a £20m, 187-room hotel which will be leased and operated as Hilton International. Both the concert hall and hotel are expected to open in 1997. Craig Coren of Colliers Erdman Lewis, Ewart’s agent, argues that such high-profile buildings augur well for the further 300,000 sq ft (27,870m2) of office development and 40,000 sq ft (3,716m2) of retail which has outline consent. Ewart, however, is adamant that development will not be speculative.
Further along the waterfront at the 30 acre (12.14ha) Clarendon Dock, Laganside Corporation has completed its £4m infrastructure programme using EU grants and funding from landowner Belfast Harbour Commissioners. The site has already attracted Grant Thornton into 20,000 sq ft (1,858m2) and this year the Northern Ireland Council for the Curriculum, Examinations & Assessment chose Clarendon Dock for its 50,000 sq ft (4,645m2) headquarters which is to be funded by NILGOSC. According to George Mackay, chief executive of Laganside Corporation, the remaining seven sites in the development’s first phase are under negotiation.
But as Lambert Smith Hampton’s Douglas Wheeler points out, takers on either site are going to have to wait 18 months before they can move in.
The only new speculative scheme that is going up is, ironically, in the suburbs. Agent McKibbin & Co is offering 25,000 sq ft (2,322m2) and 80 parking spaces at McNeice Hall, Callender Street.
In Newforge Lane, LSH is marketing Riverwood House in suites from 2,200 sq ft to 12,540 sq ft (204m2 to 1,164m2). The scheme is due for completion in spring 1996. And at Fitzwilliam Terrace, Ewart hopes to start on a total of 30,000 sq ft (2,787m2) in the autumn.
Most other developers seem to have little faith in the current market, a view reiterated by McNellis: “It is a weak office market. Last year was probably the weakest I have seen for some time.”
So, while Belfast is being weaned off public-sector dependency, neither tenant demand nor brave developers are likely to sustain it in the near future.
