While commercial property in Belfast is still offering much better returns than Dublin, agents are reporting yields hardening across the board with the prospect of sub-six per cent levels on prime office investments in the near future.

The benchmark yield for a prime office investment in the North was set earlier this year with the sale of the Abbey National Call Centre, at Mays Meadow in the Laganside area, which was developed by a Dublin company. The 57,200 sq ft building, completed in April, is fully let to Abbey National as a call centre at a rental of £672,100 sterling. It was sold by Paddy Brennan, of Lambert Smith Hampton, for £10.2 million sterling giving a net initial yield of 6.26 per cent.

Mr Brennan said that while there is little product on the market, the next prime office investment in the city is likely to achieve a yield of around six per cent, and an even lower yield is likely in the near future if the market continues to perform as it has been since the peace process began in the North.

Among the few recent major deals was the sale of Dial House, formerly the British Telecom headquarters in Belfast, which was vacated when the company moved all its operations to the BT Tower in Laganside. Agents Lisney achieved a price of £5 million sterling for the 70,000 sq ft block which was bought by local developers, Deramore Holdings, who intend refurbishing the building. Andrew Marsden of Lisney will be bringing the refurbished office building, which will have full air-conditioning, to the market next year.

Hamilton Osborne King's Belfast office is reporting brisk bidding for the historic Northern Bank building at 2 Waring Street in the city centre. Recently brought on to the market with an initial asking price of £650,000, bidding quickly passed the £1 million mark and is reported to be rising.

Number 2 Waring Street is of historic importance, having housed the city's Assembly rooms from 1769 until it was refurbished and redesigned by Sir Charles Lanyon, the 19th Century architect responsible for Belfast's finest buildings, in 1845 and converted into the headquarters of the Belfast Banking Company. It became the Northern Bank building when the two banks merged 30 years ago.

Stephen Bell of HOK's Belfast office pointed out that Number 2 Waring Street is probably the best situated.

HOK are also reporting very enthusiastic interest in Northern House, a 28,000 sq ft office building right in the city centre in High Street, close to Castle Junction and the prime shopping area of Donegall Place/Royal Avenue.

Northern House is only partly let with a current rent roll of £90,000 and a further estimated rental of £166,550 on the vacant area. Tenants include a Kookai fashion outlet and ATM on the ground floor and offices let by the Stock Exchange and Department of the Environment.

The agents say the building is suitable for investment and redevelopment. There is considerable interest and the initial asking price of £2 million was quickly surpassed with bidding understood now to be around £2.5 million.

Prime retail investments are still subject to the strongest demand with virtually nothing coming to the market in 18 months. Belfast agents estimate that the next prime shop to come on to the market in a location like Donegall Place or in the compact area of primary shopping streets off it will achieve rental yields of five per cent or less.

The shortage of prime city centre retail has been instrumental in driving up demands for shopping centre investments. Last month Lambert Smith Hampton achieved £22 million for the Richmond Shopping Centre in Derry, producing a yield of 7.66 per cent. The same agents sold the Flagship Centre in Bangor in March for £14.8, producing a yield of 7.3 per cent which should rise to 7.9 per cent.

Residential sites in good suburban areas are attracting keen interest, particularly for apartment and town house development. As in other areas of the investment market, there is a shortage of good quality sites for residential development in the city.

Helen Brennan, of Lisney, is quoting around £300,000 for a site with permission for 12 units at Dundela Park, off the Hollywood Road. Another site at North Street, Newtownards with planning for 11 units is on offer at £200,000.