Irish target UK malls
Published: 10 November, 2006
News that Treasury Holdings is bidding to take over the Battersea Power Station project in London has focused attention on the growing Irish involvement in UK property recently.
The challenge of bringing the Thames-side landmark back into use has defeated successive developers, and the building has lain derelict for more than two decades. Consent exists for more than 2 million sq ft of development including more than 400,000 sq ft of retail, but Treasury is likely to want to revise this.
Sean Mulryan's Ballymore is already a dominant player further down the Thames in London's Docklands, but Irish investors are looking way beyond the capital and shopping centres are a popular investment medium.
CB Richard Ellis calculates that Irish investors spent in excess of ?3.5bn in the UK in the first six months of 2006 alone, despite the difficulty experienced in sourcing good-quality investment product in that market at the moment.
Marie Hunt, director of research at CBRE, suggests Irish investors are on course to invest more than ?5bn in the UK this year.
By comparison, total investment turnover in Ireland's domestic investment market is expected to hit a record ?2.7bn this year, up from ?2bn in 2005.
In fact, this is nothing new. Savills calculates that during the past five years, Irish investors have bought ?18bn of UK commercial property, and the trend is clearly accelerating.
Caroline McCarthy, director of overseas investment at CB Richard Ellis, explains: "In the first six months of 2006, our research indicates that Irish investors completed 83 investment transactions outside of Ireland, of which, 60 were focused in the UK. While, 47 per cent of the transactions completed outside Ireland by Irish investors in the first half of 2006 have comprised office properties, 33 per cent have comprised retail properties, 11 per cent have comprised industrial properties and 9 per cent have comprised mixed-use properties."
So what is driving this wave of Irish investment in the UK? Trevor Gill, associate director, international investment at DTZ Sherry Fitzgerald, says: "While some are looking elsewhere for commercial property investments due to the recent movement in yields and swap rates, there appears to be little sign of a fall-off in demand from Irish investors looking to take advantage of 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."
This massive outflow of capital has been one of the driving forces behind the wave of mergers and acquisitions in the commercial agency sector, with Savills buying Hamilton Osborne King; CBRE consolidating its ownership of CBRE Gunne; and Colliers stepping up its involvement in Colliers Jackson-Stopps.
Aubrey Adams, CEO of Savills, explained at the time of his ?50m acquisition of HOK: "This is an important strategic acquisition for Savills as the HOK business model fits perfectly within our group, and will provide a platform from which we can service the growing number of Irish-based developers and investors who are looking for further opportunities in the European property sector."
----
=== USS sells gyle shopping centre ===
Universities Superannuation Scheme has sold its Gyle shopping centre in Edinburgh to Belfast-based William Ewart Properties for £267m. This reflects a net initial yield of 4 per cent.
The 361,679 sq ft shopping centre is anchored by Marks & Spencer and Morrisons. Located five miles west of Edinburgh city centre, the Gyle counts among its tenant line-up Next, WH Smith, Gap, River Island and Boots. The current rent roll is around £10.8m pa.
USS has recently completed a £1m food court refurbishment and an extension completed in 2005 provided Next with a new 20,000 sq ft store.
Jones Lang LaSalle represented USS and Colliers CRE William Ewart Properties.
----
=== private investors buy palacexchange ===
ING Real Estate is about to complete its PalaceXchange development in Enfield, north London. The development was pre-sold to a private Irish investor for about £80m, 14 months previously. The sale price was rumoured to yield 5.5 per cent.
The 200,000 sq ft development is over 80 per cent let or under offer weeks ahead of its autumn 2006 opening date with Topshop, New Look, Next, TK Maxx, Superdrug, Ottakar's, Clarks and Caffè Nero already signed up.
Chase & Partners advised ING. Lunson Mitchenall and BTWShiells advised the purchaser. Paddy Brennan, investment director at BTWShiells, believes: "There will be substantial rental growth at first rent review."
