More than a handful of Irish property investors were burnt by investments in UK property in the last few years but that hasn’t put them off from looking across the Irish Sea once again.
According to Barry MacLennan of Standard Life Investments, Irish interest in the British market is on the rise once more after falling by about 48 per cent from the peak in 2007.
With the market across the water thriving, Standard Life Investments has forecast total returns of 9 per cent per annum over the next three years.
This comes on the back of their UK property fund returning a yield of 10.8 per cent in the year to March 31st.
That’s something that Irish investors want a piece of, clearly, with MacLennan scheduled to meet up to 90 interested parties on a visit to Dublin recently.
According to the firm’s investment director, the resurgence in UK property has now spread countrywide away from the hub of London, which had been leading the charge for much of the last few years. “For me on the wholesale side, it’s probably been in the last nine months that we’ve seen things improve,” said MacLennan.
“Although central London office markets were still outperforming the rest, you could see improving prospects elsewhere. A lot of that was underpinned by a broader sense of the economic recovery story in the UK being multisector.
“It’s more than just a services sector recovery and that has led to people looking to expand businesses, and that’s what you need because property returns are inextricably linked to what happens in the underlying economy. And if you don’t have businesses being confident and looking to expand then why do you need more space?”
While the core central London office market initially earned the most focus, there are now “really attractive yields” to be had in prime retail in city centres around the UK and dominant regional shopping centres. Further growth is also being recorded in logistics and distribution warehousing and regional offices.
Not too late
While the recovery in the UK has been happening for some time, MacLennan said it was not too late for Irish investors. “Broadly we’re probably about halfway through the capital recovery story in the UK but we aren’t anywhere close to that in terms of the rental growth story. We’re probably only coming up to about a third of the way through this next phase in the cycle.
“Our key message for the advisors we’ll speak to here is that if you haven’t re-embraced it, then it’s not too late. But it’s also important to be careful because, last time around, people will remember that they were too exposed to the asset class – and prudent investment across that is what they should be thinking about because, in the past, people were too heavily exposed to property.”
