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

Belfast summary

Total investment volume in 2020: £57.04 million
Number of Deals: seven

Twenty twenty at a glance in Belfast

Investment activity during H2 was again limited due to challenges presented by Covid-19, particularly investors’ ability to inspect properties and undertake due diligence. The investment spend over the second half of the year across all sectors in Northern Ireland totalled £57.3million, bringing the 2020 yearly investment total spend to £136m, a decrease of 36 per cent from 2019. Office, industrial and supermarket yields have remained stable over the year. However, we have seen a considerable softening of yields in the retail sector, primarily driven by the effects of Covid-19 and ongoing structural changes in the sector.

Belfast’s unique selling point (USP)

Belfast continues to have one of the most unique markets in the UK. The city benefits from having two well-renowned universities and an excellent primary and secondary school system. Belfast has built a strong global reputation for being a market leader in a number of sectors including cybersecurity, fintech and film production. The city also benefits from having one of the lowest occupational and operational costs in the UK as well as access to best-in-class ICT infrastructure. We believe that Belfast is uniquely positioned following Brexit to benefit from having dual access to the UK and EU markets.

Investor type by volume in £million since 2015

Investor type	volume in £million
Investor from Northern Ireland	£246.40million
Property company from Great Britain	£92.81million
Investor from Republic of Ireland	£49.67million
International investor	£139.40million
Owner occupier	£113.88million
Institutional investor	£75.16million

Recent deals

Merchant Square, March 2021
Area: 240,204 sq ft
Notable tenants: PwC
Lease term: WAULT c.9.88 Yrs
Rent pa: £4,850,000
Price: £87m
NIY: 5.20 per cent
Purchaser: Albilad Capital

Channel Commercial Park, October 2020
Area: 99,338 sq ft
Notable tenants: Amazon
Lease term: WAULT 10 years
Rent per year: £1,590,000
Price: £27.12million
NIY: 5.5 per cent
Purchaser: UBS Asset Management

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Birmingham 

Total investment volume in 2020 in Birmingham: £859.0725 million
Number of deals: 41

Twenty twenty at a glance in Birmingham

The year 2020 naturally saw a drop in transaction volumes as a result of several lockdowns. Despite the global pandemic and its impact on transactional volumes, the Midlands logistics and distribution sector has continued to strengthen. The dynamics and resilience of the occupational market and ability to secure rental growth, combined with the negative impact on other sectors caused by the pandemic, have driven demand towards industrial and logistics with several transactions achieving stronger prices than pre-COVID-19 levels.

Birmingham’s unique selling point (USP)

Birmingham is experiencing a prolonged period of growth and investment. With over £1.3 billion spent on infrastructure since 2010 and another £3 billion planned for new projects over the next decade, including HS2, the city benefits from a globally integrated transport system. Being ranked with the highest quality of life of any city outside of London and lower living costs, Birmingham is drawing an increasing number of professionals from London, with business and living costs in the city up to 60 per cent lower than the capital. Birmingham’s office market is currently characterised by its lack of stock. This short supply results in high levels of competition when assets become available, supported by strong occupational fundamentals and positive rental growth averaging 3.08 per cent per annum over the past 10 years.

Recent deals in Birmingham

Sainsbury’s, Hams Hall, December 2020
Area: 783,674 sq ft
Notable tenants: Sainsbury’s
Lease term: WAULT 12 and a half years
Rent per year (psf): £5,724,558 (£7.30psf)
Price: £138.51million
NIY: 3.87 per cent
Purchaser: Aviva

55 Colmore Row, October 2020
Notable tenants: RICS, Savills, Pinsent Masons, WeWork
Lease term: WAULT about10.23 years
Rent per year (psf): £5,140,917 
(£32.00psf)
Price: £105million
NIY: 4.85 per cent
Purchaser: Union Investment RE

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Bristol

Total investment volume in 2020: £669.045million
Number of deals: 41

Twenty twenty at a glance in Bristol

Transaction volumes in Bristol’s office sector totalled £325.9million in 14 deals, accounting for 90 per cent of transactions in the wider region last year. Funds were the most dominant investors in the South West office market accounting for 43 per cent of acquisitions, overseas investment also remained strong accounting for 42 per cent of acquisitions. Bristol’s industrial sector saw £76.59million in eight transactions, accounting for 20 per cent of the transactions in the wider region. South West big box prime yields decreased in Quarter 4 2020 by a further 15 bps down to 4.35 per cent. Prime Big Box Rents in Bristol are £7.35 per sq ft.

Bristol's unique selling point (USP)

Bristol is widely regarded as one of the UK’s best cities to live in, as judged by The Sunday Times in 2017. Economically successful and culturally rich, Bristol boasts a diverse job pool built on  aerospace engineering industries, creative media, technology and financial services. Bristol is the South West region’s largest financial centre. The city has developed to become one of the main UK finance hubs outside of London.

Recent deals in Bristol

The Assembly, December 2020
Area: 201,201 sq ft
Notable tenants: BT
Lease term: WAULT 20 years
Rent per year (psf): £6,495,500 
(£32.50psf)
Price: £135million
NIY: 4.7 per cent
Purchaser: LCN Capital Partners

Halo, June 2020
Area: 116,184 sq ft
Notable tenants: Osborne Clarke
Lease term: WAULT c. 8.5 Yrs
Rent per year (psf): £4,136,257 
(£35.60psf)
Price: £70million
NIY: 5.53 per cent
Purchaser: Tesco Pension Fund

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Edinburgh

Total investment volume in 2020 in Edinburgh: £667.798m
Number of deals: 28

Twenty twenty at a glance in Edinburgh

The year witnessed investment volumes decrease against the long-term average – a similar drop in volumes to rest of UK. Traditionally Edinburgh’s investment market is dominated by office and retail activity, but 2020 saw an increased market share for  ‘alternatives’ and industrial reflecting investor priorities. The city’s prime office yield has softened 25bps to 4.75 per cent, in response to the downtown in the economy and the pressures of COVID-19 on the office market.

Edinburgh’s unique selling point (USP)

Edinburgh remains popular  with investors due to its strong investment fundamentals. Scotland’s capital, and a true international city, 59 per cent of its population are educated to a degree level, with Edinburgh having six universities and colleges. With the highest GVA per capita out with London, Edinburgh’s population is predicted to rise 20 per cent by 2040 and it is a city that historically has low levels of unemployment. A lack of development pipeline should ensure rental growth across all sectors meaning investors will continue to be attracted to Edinburgh’s offerings. 

Recent deals in Edinburgh

Aegon HQ, July 2020
Area: 247,500 sq ft
Notable tenants: Aegon
Lease term: WAULT c.17.5 Yrs Rent pa (psf): £7,325,000 per year (£29.60psf)
Price: £133million
NIY: 4.33 per cent
Purchaser: M&G Hyundai AM/Roebuck AM

Quartermile 3, September 2020
Area: 73,429 sq ft
Notable tenants: Cirrus Logic, State Street Bank
Lease term: WAULT c. 7.25 years rent pa (psf): £2,227,957 p/a 
(£29.73psf)
Price: £45million
NIY: 4.33 per cent
Purchaser: KanAm Grund

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Glasgow

Total investment volume in 2020 in Glasgow: £250.605million
Number of deals: 24

Twenty twenty at a glance in Glasgow

Investment volumes declined significantly in 2020 with only five office transactions being completed. Encouragingly, investor demand increased for good quality industrial assets with several significant investment deals going under offer in late Q4 at record yield levels. In contrast, investor demand for high street retail investment remains very limited as yields continue to drift across this sector. Glasgow continues to hold its prime office yield at 5.25 per cent, which still offers the best value of the ‘Big 6’ office markets.

Glasgow's unique selling point (USP)

Glasgow is officially the UK’s largest retail centre by spend outside London’s West End. It is also the largest centre in Scotland in terms of foreign direct investment. On average, office rents are 72 per cent lower and wages 49 per cent lower than London and as a result Glasgow is a well-established home for numerous, globally recognised corporates. The city accommodates 34 per cent of Scotland’s jobs and 28 per cent of Scotland’s business. Conference facilities such as the Scottish Event Campus (SEC) are also best in class. With an under-supply of office, industrial and build to rent (BTR) stock across the city and further rental growth projected across these asset classes, Glasgow continues to be a highly sought-after investment location.

Recent deals in Glasgow

150 Broomielaw, September 2020
Area: 96,750 sq ft
Notable tenants: Scottish Enterprise
Lease term: WAULT c. 4 years
Rent pa (psf): £3,272,726 p/a (£31.76psf)
Price: £40million
NIY: 7.66 per cent
Purchaser: Elite Capital Partners

Guildhall, September 2020
Area: 128,229 sq ft
Notable tenants: Clydesdale Bank, News Corp, Post Office
Lease term: WAULT c. 3.75 years
Rent pa (psf): £2,791,813 p/a (£21.76 psf)
Price: £29.511million
NIY: 9.51 per cent
Purchaser: Maya Capital

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Leeds

Total investment volume in 2020 in Leeds: £348.962million 
Number of deals: 35

Twenty twenty at a glance in Leeds

The Leeds market largely mirrored the national picture in 2020, as office investment volumes dropped significantly, contributing to below average volumes for the year as a whole. This was despite unabated growth in demand for industrial investment, where prime yields sharpened to 4.75 per cent and the biggest problem continued to a be shortage of stock. We envisage the investor preference towards industrial continuing but expect to see a resurgence in office transactions moving into the middle of 2021, driven by the combination of an improving value proposition and a gradual return of the workforce.

Leeds' unique selling point (USP)

The size and diversity of the Leeds economy, combined with a central location and a highly-trained workforce, make it one of the fastest growing and most impressive places to do business in the UK. The city benefits from 38,900 graduates annually, providing direct access to talent, facilitating growth and expansion. The city is also a leader in professional services, digital technologies, manufacturing, healthcare and innovation, resulting in Centre for Cities reporting Leeds to have the fastest-growing private sector jobs rate in the UK. This combination has created significant investor confidence and the Leeds City Region now has over £13billion of investment onsite or in the pipeline.

Recent deals in Leeds

Bridgewater Place, November 2020
Area: 249,900 sq ft
Notable tenants: DWF, Eversheds, EY
Lease term: WAULT circa 4 years
Rent pa (psf): £6,300,000 p/a
(£25.20psf)
Price: £84.5m
NIY: 7.2 per cent
Purchaser: M7

Clarendon Quarter, August 2020
Area: 324 BTR Units
Rent pa (psf): £2,600,000 p/a
Price: £41million
NIY: 4.25 per cent
Purchaser: Aberdeen Standard Investment

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Liverpool

Total investment volume in 2020: £81.745million
Number of deals: 18

Twenty twenty at a glance in Liverpool

Much like the rest of the UK, investment volumes in Liverpool declined over the course of 2020 as the impact of restrictions was felt hard. However, investor appetite post-pandemic should be encouraging. Liverpool is suffering from a critical supply of new Grade A office space and industrial space is highly sought after. Rental growth is expected as a result. Retail occupancy in Liverpool, at a time where the high street is struggling UK-wide, remains relatively high in the city - testament to why retail yields here are much lower than the other main UK cities.

Liverpool's unique selling point (USP)

Liverpool is an integral part of the North West, the UK’s second-largest regional economy, with its own economy worth more than £149billion. Due to Liverpool’s world class infrastructure, high skills base, and low cost of housing, it is identified as having more growth potential than London and many other core regional cities. Liverpool and the surrounding region is the number one recipient of direct foreign investment in the UK outside London and the South East. The area is the base of more than 3,000 businesses, providing compelling evidence of the quality of the city’s business environment and commercial opportunities.

Recent deals in Liverpool

20 Chapel Street, April 2020
Area: 155,000 sq ft
Notable tenants: LFC, EY, Barclays,
Mason Owen
Lease term: WAULT c.5 years
Rent pa (psf): £2,686,000 p/a
(£17.33psf)
Price: £37.25million
NIY: 6.75 per cent
Purchaser: Square Ape/Citibank

Boulevard Industrial Park, March 2020
Area: 219,619 sq ft
Notable tenants: AstraZeneca
Lease Term: WAULT c. 18.2 years
Rent pa (psf): £1,218,368 p/a (£5.54 psf)
Price: £20.8million
NIY: 5.49 per cent
Purchaser: Realty Income Corporation Council

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Manchester

Total investment volume in 2020: £2.172billion
Number of deals: 49

Twenty twenty at a glance in Manchester

Whilst the number of transactions across all major sectors was down in 2020, each sector’s volume was buoyed by large individual sales including The Trafford Centre (rumoured to have sold for just north of £1billion), Manchester Airport Group’s portfolio and BT at New Bailey. In office investment, transactional volume was down in 2020 with nine city centre transactions totalling £310.125million. At the absolute prime end of the market, pre-COVID-19 pricing has been sustained. Core plus assets, on the other hand, saw pricing soften by 50 to 70 bps. The average lot size within the city centre was up to £33.2million as a result of two major office transactions in Quarter 4: BT at New Bailey (£112million) and Tootal Buildings (£77million).
Institutional activity was down in 2020 with just one asset acquired by a UK institution.

Manchester's unique selling point (USP)

Manchester remains attractive to investors due to both its strong investment fundamentals and discount to central London pricing. Manchester has an extremely robust occupational market and has seen office-based employment grow by 31 per cent over the last 10 years. Home to four universities with a student population of over 100,000, Manchester benefits from an exceptional talent pool and also has the highest student retention of any regional city with 75 per cent of students remaining upon graduating. The city has experienced sustained long-term rental growth over the last 20 years with prime rents increasing by 2.80 per cent per annum on average.

Recent deals in Manchester

The Trafford Centre, December 2020
Area: 2.2m sq ft
Notable tenants: John Lewis,
Selfridges, Primark, Next
Rent pa (psf): £87,600,000 p/a
Price: circa £1billion
NIY: 8.76 per cent
Purchaser: CPPIB

BT, New Bailey, December 2020
Area: 175,000 sq ft
Notable tenants: BT
Lease term: WAULT c. 20 years
Rent pa (psf): £4,298,000 p/a (£28 psf)
Price: £112.6million
NIY: 4.25 per cent
Purchaser: Warrington Borough Council

 

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Key Ireland markets

Total investment volume in 2020: £3.47billion (Cork and Dublin)

Twenty twenty at a glance in Ireland

International investors, such a significant driver of activity in the Irish CRE market over the last decade, simply could not travel to inspect investment opportunities during 2020. As a result, many investment sales campaigns were postponed. Despite this, demand for core assets remained remarkably resilient throughout 2020 and some transactions were completed regardless, with investment spend for the year reaching more than 3.6billion Euro, a decent result considering the challenging conditions. Of this total, 3.2 billion Euro was invested in Dublin, which has consistently accounted for between 85 per cent and 90 per cent of investment in Ireland in each of the last five years. The vast majority of transactions concluded in the Irish market last year were office and residential investments, with multifamily coming into its own during 2020, having firmly demonstrated its counter-cyclical characteristics.

Sector type spend in Ireland

Sector	Percentage
Residential	48 per cent
Office	36 per cent
Industrial	8 per cent
Retail	4 per cent
Hotel	2 per cent
Mixed use	1 per cent
Healthcare	not applicable
Other	not applicable

Investor type in Ireland markets in 2020

Investor type	Percentage
Industrial fund	41 per cent
Investment manager	9 per cent
Private investor	4 per cent
Property fund	9 per cent
REIT	2 per cent
Sovereign wealth fund	5 per cent
Other investor type	26 per cent
Asset manager	4 per cent