The Royal Institution of Chartered Surveyors (RICS) said commercial, which covers retail, industrial and offices, had faced a challenging time since the end of last year.
Its commercial property monitor said demand from occupiers and investors alike fell in the last few months of 2022, with the exception of the industrial sector. That’s expected to result in falling capital values and rents, RICS said.
Demand has been strong for industrial property and land with Coca-Cola HBC Ireland and Northern Ireland last week announcing a £17m expansion of its production facility at Knockmore Hill in Lisburn.
Property professionals who were surveyed by RICS, their representative body, said demand from occupiers had fallen at the end of last year.
But that masked a contrasting performance for the industrial, office and retail sectors. Respondents said demand was up for industrial space, though they reported that office and retail demand was down – more acutely for retail.
Likewise, there was a fall in demand from investors for office and retail, with a more marked deterioration when it came to investment in retail. But they indicated that demand for industrial space from investors had grown.
Brigid O’Donnell, investment director at property business MRP Investment & Development in Belfast, said: “I believe we are currently in a downturn which could deteriorate into the first and second quarter of the year but I am optimistic that the market will improve by the end of 2023”.
Henry Taggart, a senior associate at commercial property agency OKT in Coleraine said: “Whilst commercial property in the industrial sector remains buoyant, other commercial property types seem to be experiencing a degree of decline in terms of buyer and tenant demand and capital and rental value achievable for all the well-known reasons.”
Tarrant Parsons, senior economist at RICS said investment in commercial property had been hampered as tighter monetary policy and higher borrowing costs led to falling valuations. But UK-wise, there were some bright spots.
“Indeed, linked to the rise in government bond yields over the past six months, capital values have pulled back noticeably of late, while expectations point to this downward trend continuing over the near term.
“That said, for now at least, pockets of resilience are visible on the occupier side of the market, with tenant demand still edging higher across the industrial sector, while the outlook for prime office rents also remains in positive territory, perhaps supported by more sustainable features.
“Going forward, the broader economic landscape will be crucial in determining how trends across the occupier market unfold from here.”