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News : European Last Updated: Dec 19th, 2007 - 13:17:15

Irish are top foreign purchasers of UK commercial property
By Finfacts Team
Aug 24, 2006, 07:22

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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:

  • BP Pension Fund Knightsbridge Estate, 1-85 Brompton Road, London by Quinlan Private for £540 million
  • Whitgift Shopping Centre, Croydon by Anglo Irish Assurance for £220 million
  • 250 Bishopsgate, London by Evans Randall for £175 million

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

Property investment in Europe hit a record 95 billion in the first six months of 2006 - a 30% jump on the same period in 2005 according to a recently published bulletin from Jones Lang LaSalle.

The report also found that unlisted third-party managed funds were the most prominent type of purchaser, responsible for 43% of purchases in the first half of 2006. The next most prominent type was the listed sector (taxed and tax-transparent) at 16%, followed by private individuals or syndicates (the vast majority being British or Irish) at 15%. Institutions had a relatively low share at 11%.

Paul O'Loughlin Kennedy, Investment Property Show Organiser, commented “The report felt the Irish contribution to the 15% of investment been attributed to private investors was significant enough to draw attention to it. The importance of this cannot be ignored. Conservative figures have suggested that between 5 and 6 billion will be invested abroad by individual private Irish investors in 2006. More often than not many of these will be amateur who will not be offered informed professional advice in several areas including tax and law prior to spending their money. I believe that it is the responsibility of anyone who can offer investment advice, whether an independent financial advisor, a legal firm or an accounting practice, to, at the very least ,understand the complexities of it in order to properly offer best advice to individuals.”

The exhibition organisers have brought together industry leaders from both home and abroad to offer intermediaries, financial and legal experts a platform to be educated about the foreign markets and an opportunity to discuss their roles as advisor's. Hosted by John Bowman the guest speakers include, amongst others, Pat McArdle Chief Economist, Ulster Bank; Hugh Campbell Director – Tax & Legal Services, PricewaterhouseCoopers (PWC); Jack Harty Business Development Manager, BOI and Peter Gage Morris, Managing Director, Ober-Haus.

O'Loughlin Kennedy continued: “This report is very reflective of the growing trends of a strengthening European wide economy. For the last ten years we in Ireland have been benefiting from unprecedented levels of growth in the domestic property market. As the main European economies begin to strengthen we can expect that the European wide investment market will also benefit and follow Irish trends for growth.”

The Irish property market is predicted to slow down with returns on internal market investment leveling off over the next two years. Many Irish Investors are therefore looking towards the recovering markets throughout Europe. Most of the focus of investment is been concentrated on the three low risk western markets, with a combined share of 73% in the first half of the year distributed between the UK, France and Germany.

© Copyright 2007 by Finfacts.com

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