The right moves: Brexit fallout sees UK developers looking for opportunities in Ireland
It is becoming increasingly apparent that a new wave of UK developers is focussing on Ireland, and much of that, I suspect, is down to Brexit. There are clear signs that the slowdown in the UK markets is beginning to bite. The number of new commercial developments is falling and residential prices and new starts are reducing too. There are several factors behind this and whilst the established Irish developers may not like it, could this influx of competition be a good thing for the market?
For decades, Ireland saw a small cohort of large UK investors based here — companies such as British Land, Royal Liver, Friends First and MEPC — but they tended to do more purchasing of investments, as opposed to direct development. Now, however, it is names such as U + I Group PLC, Brookfield, Quintain and others that are cropping up — and particularly in pursuit of large-scale urban regeneration schemes.
Indeed, the above names, plus US-headquartered Hines and Ireland’s Harcourt Developments are believed to make up the shortlist to partner with Diageo in the redevelopment of its five-hectare Dublin site at St James’s Gate. Nor is it any coincidence that the prospective buyer of the Marlet Property Group’s €450m ‘Dublin Living’ portfolio, comprising 1,170 apartments, is the UK-based Round Hill Capital.
One of the forces behind this is that these companies have built up large teams, with a lot of experience in handling big commercial and residential regeneration schemes around London. With the market there cooling, they see Ireland as an opportunity into which they can export their skill sets and knowledge.
These UK developers prefer very large scale projects and they bring several benefits. Firstly, in reality, Irish developers are still finding it very difficult to secure funding from the Irish banks. So, these UK developers, who are generally funded by Asian and US investment funds, are bringing a badly-needed source of capital into the market. Another factor driving overseas interest in Ireland is that, because of Brexit, the cost to European funds of hedging sterling for UK projects, has become prohibitive, and Ireland is an attractive alternative.
This easier access to development funding gives these developers an advantage over local developers in that they can enjoy greater economies of scale, by undertaking large schemes in one phase. Locally, however, the banks remain nervous and still prefer to see developments undertaken in phases, which is less risky, but more costly. It’s controversial, but UK developers can probably build larger schemes, speculatively, which local developers cannot.
It’s also probably fair to say that ‘new blood’, as well as bringing new money, brings new ideas and new design concepts, and that’s good for the market. It’s also positive that the track record of these players is a healthy mix of commercial and apartment development, with some preferring to hold properties, and others selling.
However, property acquisition and development is never as easy as it looks, and some of these players are discovering how frustrating it can be to find the right site. Several of them have cleverly partnered with local developers, who have world-class standards and the local knowledge, like Park Developments, and Hines, who are long established here.
With a dire shortage of residential accommodation, and a booming office market, it’s frustrating that more sites can’t be got onto the market more quickly and both local and overseas developers will be eagerly tracking large opportunities such as The Irish Glass Bottle (IGB) site in Ringsend, and the ‘City Block 9’ site in central Dublin. The pool of Irish developers remaining is small. Overseas money and experience can only be good for the market.
Launch of my new novel
As a sales agent for 28 years in the property business, I devised many a marketing scheme for clients and sat through scores of marketing meetings. All that must have left its mark, as the protagonists in my new novel ‘The Manhattan Project’ identify weaknesses in American culture and devise a cunning plan to market New Yorkers to death!
The book will be published initially in the UK and Ireland and translation rights have been sold to various territories, including Germany. I am pleased to invite my readers to the Irish launch of ‘The Manhattan Project’ at Hodges Figgis, on Dawson St at 6pm next Thursday (May 10). I hope to see you there.