While much of the UK is seeing some signs of a return to prosperity after the recession, life for Northern Ireland’s small industrial sector has become increasingly more difficult over the past few years.
According to Douglas Wheeler, partner with BTW Shiells in Belfast, demand levels have softened and “as a consequence, there have been falls in rental and capital values”. Industrial development sites have been most affected, dropping by more than 50%, says Wheeler.
There are four reasons for this: first, there is little or no funding for commercial property in Northern Ireland, which has a smaller banking base than the rest of the UK. Second, Northern Ireland is affected more acutely by the Republic of Ireland’s economic difficulties.
Third, the NI economy is performing poorly compared to the UK; indeed, it is the only region still experiencing falling levels of business activity. According to Wheeler, the last period of growth occurred in November 2007.
And finally, impending public sector cuts are causing negative sentiment across the market.
No new space
Given this backdrop, it is hardly surprising that there has been virtually no new space developed in the past year. And, as Wheeler says: “There is little prospect of the position changing in the next few years.”
He adds: “Levels of purpose-built new space has always lagged behind other regions of the UK. This is a legacy of the 1960s and 1970s when the government funded the development of large factories which then closed.
“They have now been developed into business parks where industrial space tends to be available at competitive rental levels. There is also evidence of some older buildings being demolished to avoid empty rates liabilities, which in Northern Ireland stand at 50%.
“While all the conditions have led to a greater supply of space, available accommodation tends to be lower-quality buildings, as there are only a few high spec properties available. Furthermore, there is a limited supply of larger units over 45,000 sq ft that are vacant.”
As for demand, Wheeler says the most active areas concern companies involved in recycling and larger, logistical firms requiring space normally on short-term contracts to tie in with the contracts offered by their clients. Demand for smaller, sub-2,000 sq ft units aimed at the indigenous market is flat.
Major difference
One major difference with the NI market compared with the rest of the UK is that Invest Northern Ireland, part of the Department of Enterprise, Trade and Investment, is the province’s largest industrial landowner.
The government body has strategic landholdings across the six counties, totalling 950 acres. Over the past two years it has reduced the asking prices of its land to stay in touch with the market. As a result, says Wheeler, land values now range from £67,000 to £350,000 per acre on the basis of a standard INI lease.
Land held in the private sector, which used to trade at around £1m per acre in Belfast’s better industrial estates, has fallen to around £300,000 per acre. The prices are substantially lower than they were two years ago.
There is evidence that the level of enquiry may have started to pick up and this, says Wheeler, should lead to an increase in transactions. As for the future, he believes that falls in land values may help to inject some life into the market.
