Business Irish

Friday 22 August 2014

Property giant Kennedy Wilson warns Irish market 'moving ahead of itself'

Firm more cautious and moves its focus to Southern Europe

Peter Flanagan

Published 26/06/2014 | 02:30

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The Alliance Building was one of Kennedy Wilson’s D4 buys

ONE of the biggest buyers of commercial property here since the crash has signalled it is starting to move on from the Irish market, switching focus to southern Europe.

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Kennedy Wilson Europe managing director Fiona D'Silva said pricing was "moving ahead of itself" in Ireland and added that while the firm still planned to do deals here, it has now begun to focus on Spain and Italy's real estate markets.

"We think it has been great in Ireland and see things still coming off banks' [balance sheets] but pricing is moving ahead of itself a little bit so we are a little bit more cautious and looking more at opportunities outside Ireland and the UK to Italy and Spain," she said.

She was speaking at the Private Equity Real Estate (PERE) conference in London.

Her firm, Kennedy Wilson, has spent close to a €1bn on property in Ireland in the last three years, investing in offices, apartment blocks and development sites across the country – but especially in Dublin.

The company had been expected to set up a real estate investment trust (REIT) in Ireland to run its portfolio here but instead decided to list its European business in London earlier this year. That makes it easier to invest in markets outside Ireland.

While investment firms have piled into Irish property in recent years, helping drive a recovery in the market, the race to get in here is now being seen by some outside funds as "over" from an investment perspective.

At the event in London a number of investors said that there was still some opportunities to make profits in Ireland but there was little space now for "opportunistic buyers" who tend to buy an asset at the bottom of the market and "flip it" a few years later without doing a lot to improve the asset, such as refurbishing.

Investor focus is now shifting to Spain and Italy in a big way. Goldman Sachs global co-head of real estate Jim Garman said he expected "literally billions" of euro worth of property from those two countries to be put on the market over the next five years.

The news that Kennedy Wilson and other investors are turning their attention away from Ireland is likely to put huge pressure on NAMA which has accelerated the pace at which it is selling off its assets to take advantage of the rising market.

It will also increase the prospect of more Irish commercial property being sold off in the months ahead as US investors in particular take their profits.

Ms D'Silva added that rents in Dublin especially were still climbing.

"We have been in Ireland for a while now and we are seeing a micro economic realignment for real estate there. In Dublin there has been an influx of corporates and young workers and seeing as nothing was built for the last seven years rents have gone higher," she said.

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