Investment in NI impacted by Covid-19 crisis

Restrictions relating to the coronavirus pandemic had a major impact on Northern Ireland’s investment market in 2020, according to new research published by Lambert Smith Hampton.

The Investment Transactions Northern Ireland Bulletin for 2020 reported that investment volumes totalled £156.0m last year, 28% below 2019 levels and 33% below the five-year average. The fall in annual volume was not as stark as initially expected primarily due to a strong final quarter.

Only seven deals under the value of £5m took place throughout the year, compared to an annual five-year average of 33.

A much welcomed boost to the market came from four deals which were each worth over £20m – the most since 2015.

Somewhat surprisingly, and despite the coronavirus pandemic, the volume of retail investment was on a par with 2019.

A total investment figure of £90.3m made up 58% of Northern Ireland’s total investment volume in 2020.

The largest deal in 2020 was NewRiver REIT’s sale of a 90% stake in Sprucefield Retail Park in Lisburn for £34.7m (NIY 9.00%) to their joint venture partner Bravo Strategies III.

Other retail sales included Abbey Retail Park in Newtownabbey, purchased by Slate Asset Management for £33m (NIY 9.10%) from Hammerson Plc and David Samuel Properties’ purchase of Holywood Retail Park for £17.8m (NIY 9.25%) from Aviva Investors.

Industrial investments were at a record high for 2020, a pattern also noted across the UK in 2020. UBS Asset Management purchased the Amazon distribution warehouse at Channel Commercial Park for £27.0m (NIY 5.50%) from Titanic Quarter Limited.

At £57.1m, Northern Ireland’s industrial investment was nearly three times higher than the five-year average.

The office sector was expectedly and significantly stricken by restrictions, with investment in the office market falling to £8.6m, 78% below the five-year average, and the lowest since 2012.

It is expected that this sector will bounce back strongly in 2021.

Notably at £95.2m, institutional/private equity investment was 27% above the five-year average and the highest since 2015. Funds acquired both Sprucefield and Abbey Retail Parks as well as the Amazon ‘last mile’ distribution warehouse in Titanic Quarter.

Activity from local private investors, often the most active in the Northern Ireland market, was limited during 2020 when compared with previous years and whilst a volume of £34.4m in 2020 was only 19% below the five-year average, a number of larger transactions masked a reduction in activity from a deals perspective.

Jonathan Martin, director, Lambert Smith Hampton, commented on the report’s findings highlighting the impact of the pandemic as well as the hope for the future thanks to the vaccine and which could result in ‘an easing of restrictions’ and lead to ‘increased market activity from spring 2021 onwards’.

He continued: “The coronavirus pandemic undoubtedly had a massive impact on the Northern Ireland investment market in 2020, however, there were still a number of significant transactions which clearly demonstrates there is investor demand for good quality stock with strong fundamentals.

“The vaccine is a massive step forward and with the vaccination programme well underway, we anticipate that an easing of restrictions will lead to increased market activity from spring 2021 onwards.

“As a level of normality returns, we expect to see increased investor demand especially for prime assets and with an element of distress inevitable post pandemic, adjustments to pricing across certain asset classes will present new opportunities for investors.

“Despite the challenges, there are encouraging signs and with a number of large transactions already in the pipeline, there is reason to be optimistic that investment volumes in 2021 will be healthy.”

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