||Last Updated: Dec 19th, 2007 - 13:17:15
Ireland has overtaken the United States as the single largest cross-border investor into UK commercial property, accounting for almost 22% of total overseas purchases in 2005, claims global property adviser DTZ.
|This week it was announced that Dublin-based Cosgrave Property Group paid Hammerson £281m for the Liberty Shopping Centre in Romford, Essex. The Cosgrave family have invested almost £500 million in UK property this year - more than treble the forecast total of venture capital investment in Irish companies for 2006. Photo credit: Romford.org|
According to DTZ Research in its new report on Overseas Acquisitions into UK Commercial Property, £12.3 billion was invested in UK commercial property from overseas investors in 2005, representing a fall on 2004. In real terms, however, 2005 saw an increase of 9% on 2004, if the large corporate transactions, including the £5.1 billion Songbird purchase of Canary Wharf, are ignored.
The strong volumes of purchasing activity indicate that non-domestic investors remain a key participant in the UK real estate investment market, accounting for around a quarter of total purchases overall.
The lion’s share of overseas investment is dominated by five sources: Irish, US, Middle East, German and Dutch capital. Irish investors represented the largest single source of cross-border capital into the UK with over £2.7 billion of purchases in 2005 – this figure mirrors the levels achieved in 2004 which stood at £2.8 billion. In keeping with historic trends, around 75% of this activity was attributed to private investors.Bank of Ireland Private Banking says that the Irish invested €30 billion in domestic and overseas commercial property in the period 2001-2005.
House building in Ireland increased by 23.6% in the first 7 months of 2006 and the flow of money shows no sign of easing, despite fears over higher borrowing rates, with hundreds of millions of pounds spent by new Irish entrants in recent months.
Investments include David Arnold's D2 Private, which, in April, paid £325m for Woolgate Exchange in the City and has since bought a £70m portfolio of HBOS bank branches.
This week saw Cosgrave Property Group pay Hammerson £281m for a shopping centre in Romford, Essex.
According to the Financial Times, the deal takes Cosgrave's UK spending up to almost £500m since January following the purchase of the £80m Caxtongate shopping area in Birmingham and a £136m pair of office blocks near London's Oxford Circus.
According to Hammerson, Romford was bought on a rental income of just £10m, suggesting an initial yield of only 3.5 per cent.
Major acquisitions made by Irish investors according to DTZ, during 2005 included:
US investors were the second largest with around £2.6 billion of acquisitions, German third with £2.2 billion, Dutch fourth and Middle Eastern fifth with total purchases of £1.4 billion and £1.3 billion respectively. With regards to the Dutch statistic, this primarily comprises of just one major deal, the acquisition of 128 commercial properties from Abbey National PLC by ING Real Estate for around £1.2 billion.
Central London was the most popular location for overseas investors attracting 52% (£6.4 billion) of non-domestic capital in 2005.
Turning to sector spread, offices continued to be the property type of choice for overseas investors attracting over half of total cross-border investment to stand at £6.3 billion – 80% of which emanates from central London.
Overseas investors will dig deep into their corporate purses to increase purchasing activity in UK real estate in 2006 and 2007 says global property adviser DTZ.
Trevor Gill, Associate Director, International Investment at DTZ Sherry Fitzgerald, comments: “Whilst some Irish investors are looking elsewhere for commercial property investments due to the recent movement in yields and SWAP rates, overall there appears to be little sign of a fall off in demand from Irish Investors who are looking to take advantage the growth prospects for London. The drivers for this demand continue to include the positive rental growth story for the UK, a lack of available product in the Irish market, the availability of finance from Irish lending institutions for UK property transactions and a familiar market.”
Ben Cook, Associate Director, International Investment adds: “Greater appetite for UK real estate is expected from Asian and American investors, over the next 12 months, as well as from private investors from Ireland, the Middle East, Spain and Italy. Australian investors have also become increasingly active in Europe over 2005 and it is strongly expected that their focus will broaden to include the UK as 2006 progresses.”
Autumn Investment Property Show, Citywest, Dublin September 8th-10th