US and other foreign high-tech tenants are showing more and more interest in Northern Ireland as the peace process consolidates says Billy McCombe, senior partner in the Belfast-based commercial agency DTZ McCombe Pierce which became affiliated recently with Sherry FitzGerald.
Political stability had led to a number of major investors, particularly from the United States, to consider Northern Ireland as a base in Europe. Mr McCombe said things had changed dramatically with the first IRA cease-fire in 1994. "Suddenly there was great interest from external sources. Many of them thought there was no industry on the ground at all so they were surprised to find that local companies and developers were highly sophisticated and there wasn't quite the free-for-all opportunity they had expected.
"I am aware of a number of institutions, particularly insurance companies and pension funds, which are still hesitant to come over here and invest major sums in suitable accommodation. We still have some convincing to do but I am very optimistic."
He added: "I am very optimistic about Northern Ireland's commercial property market. What is happening is an upgrading of office accommodation. People are moving out of out-dated offices into accommodation with raisedaccess floors, air-conditioning and so on. Especially here in the North, such quality office space has until recently been the exception.
"Property takes a long time to yield a profit but given political stability there currently is an opportunity for terrific growth across all sectors, from retail to office and leisure accommodation.` McCombe Pierce and Partners was founded six years ago by Mr Billy McCombe and Mr Michael Pierce, both formerly partners in Lisneys. The company, which solely concentrates on commercial property and employs 16 staff in its Belfast office, has recently formed a partnership with Sherry FitzGerald and its UK-based alliance company DTZ Debenham Tie Leung. Both Sherry FitzGerald and DTZ hold 20 per cent each in the new partnership while 60 per cent remain in the hands of the existing partners, Mr McCombe, Mr Pierce, Mr Peter McMorran and Mr Colin McDowell. Is there a danger of the relatively small Northern agency being swallowed up by such giants as DTZ and Sherry FitzGerald, which at the end of June reported a 42 per cent rise in pre-tax profits? "We don't think so. We retain a very large share of the equity of our company and to be fair to both Sherry FitzGerald and DTZ, they recognise that there is an existing business here. I believe they recognise that we provide a quality basis both in terms of services and personnel to them and that is very much in keeping with their own philosophy.
"I think unless you are a very specialised agency covering a niche market, mergers are the way the industry is going. We are already seeing the benefits of our links with both companies through their national and international contacts."
The benefits for the three companies involved in the partnership are two-fold, says Mr McCombe. While McCombe Pierce's main aim is to attract new investment into Northern Ireland by providing office accommodation to companies, both Sherry FitzGerald and DTZ are benefiting from the company's local contacts and know-how on what is their first foray into the Northern Ireland market. The North is proving increasingly desirable to overseas companies in search of a skilled workforce but also because of lower rental costs, he adds.
"Fujitsu has recently taken up 70,000 sq ft of accommodation in Lanyon Place at a rent of £13.50 per sq ft - a reasonable rate by Dublin or London standards. We are currently working on a number of projects, one with a company looking for at least 70,000 sq ft office space in Northern Ireland. There is always a very fine dividing line between an over-supply and an under-supply in office space, but I think developers are currently not taking too great a risk when they construct speculatively."
While there is a tendency towards shorter-term leases which offer companies more flexibility, office rents are set to increase in the North, Mr McCombe insists.
"There will be further growth in office rents largely due to the cost of providing this higher-quality accommodation which occupiers now want. There are only a few buildings of this sort of standard at the moment which are nearing completion, with a great many only at the planning stage."
While the trend among companies has been to rent rather than buy, the current price for office accommodation is between £180 to £200 per sq ft, a six to seven per cent yield, he adds.
Devolution of fiscal powers to the Northern Ireland Assembly could bring an enormous boost to Northern businesses, says Mr McCombe. "Compared to the Republic, we have been at a disadvantage over tax rates and incentives. They have been very innovative with regard to tax incentives and the designation of tax-advantaged areas, something that has attracted inward investment on a large scale. A local Assembly with the same tax-raising or lowering powers coupled with ongoing political stability could bring untold benefits to Northern Ireland."
