Investing in Belfast’s Future: A Real Estate Research Report

The supercharged market

The continued acceleration of the global e-commerce market, the property’s exceptional covenant and the robust performance of the Northern Irish industrial sector provided us with confidence in the strength of this acquisition. This strategically-located, prime logistics property offers highly defensive characteristics and visible, longterm income streams that align with the returns target of our clients.

Titanic Quarter Logistics acquisition
Gijsbert van Riemsdijk
Head of Transactions Europe,
UBS Global Asset Management

Overview of logistics and industrial market

Belfast’s industrial market has always been compact and primarily owner-occupier driven. Most industrial stock within the city is currently occupied, be it let or sold, with vacancy levels at an all-time low. Research from CBRE suggests there are an estimated 50 active industrial requirements for industrial space in Northern Ireland at the moment, equating to some 1.9m sq ft.

Positive success stories:

• The £6million sale of Harland & Wolff to InfraStratta in 2019 was hugely significant, safeguarding some 120 jobs in the process.
• Spirit AeroSystems Belfast (formally owned by Bombardier) plans to expand its aerospace manufacturing facility by some 340,000 sq ft.
• Amazon moved to a new 100,000 sq ft facility at Titanic Quarter as the firm looks to deepen its local networks of delivery vans for its last-mile service. The US firm is also reportedly seeking its first warehouse in the Republic of Ireland to carry out orders currently shipped from the UK, which could see further commerce pass through Belfast as a result.

Development

The demand for industrial space throughout Northern Ireland is only set to grow in a post-pandemic world. Belfast will need to see further lands zoned for logistics development to meet the demand for warehouse space. However, it is also more than likely that industrial/logistics development will happen in the city suburbs and further afield in the wider Belfast Region.

It is likely that local authorities will become more receptive to logistics developments due to the job creation opportunities. It will therefore be critical for councils to deal with applications quickly in order to facilitate further growth.

Prime rents in logistics and industrial market 

Historically, industrial rents have remained low at £4.50 psf. However, given this lack of quality supply currently available to occupiers, the sector should experience growth in 2021, setting it apart from many other commercial property sectors. New build rents are anticipated at £6.00 to £7.00 psf.

Investment

Since 2015, Belfast has transacted £34.47million worth of industrial investments, with deals growing in stature. Local investors purchased Edenderry Industrial Park for £1.4million in 2017, but this was surpassed by the purchase of 96 Duncrue Street for £2.44million the following year. Then Amazon’s Last Mile distribution hub at Channel Commercial Park sold to UBS for £27.12million in 2020 at a reported yield of 5.5 per cent. Out of the seven industrial deals in Belfast since 2015, six have been acquired by Northern Irish investors seeking to to buy up what limited stock comes to the market.

Looking forward

In the short term, it is expected that investor activity will continue to focus on industrial and logistic properties with a growth in investment volumes over the next 18 to 24 months. This may well change the type of investor, as other traditional investor types try to gain a foothold in NI industrials. We expect yields to harden and capital values of good quality industrial stock to rise. The biggest challenge is the continuing lack of suitable investment stock. Therefore we expect the development pipeline to increase significantly to meet investor and occupier demand over the short to medium term.

Industrial market thought piece: outward industrial growth

The logistics and industrial sector is set for significant growth over the next five to ten years. As with the office sector, there is a supply-demand imbalance. There has not been a speculative industrial-logistics scheme built within the last 12 years in Belfast. We expect that new schemes will be brought forward towards the end of 2021 and early 2022.

The Belfast Region has very compelling reasons for investment:

• Northern Ireland prime industrial yields, at 5.75 per cent, are at a large discount to GB (4.00 per cent) and Republic of Ireland (4.75 per cent)
• Rental levels are one of the lowest in UK and Ireland, offering headroom for growth 1.9 million sq ft of requirements with limited supply
• Dual market access has the potential for allowing further growth in manufacturing
• A booming logistics sector with the possibility of serving all Ireland and with links to the UK

CBRE surveyed over 100 of the largest logistics occupiers in Europe to gain insights on their expansion plans, current challenges, location and building preferences and the impact of Covid-19 on their real estate strategies.

With dual market access, Belfast is very well-positioned to take advantage of this growth and we are already beginning to see significant interest from international investors and occupiers. Over the next few years the key challenge will be availability of good quality space and supply of land for development. Councils will need to look carefully at existing zoning policies to establish if additional tranches of land can be zoned and potentially released for development purposes.

Important factors for location and building selection

Vitally important or important factors

Less important factors