Southern Irish investor interest which helped boost the Northern Ireland property market over the past three years has begun "jumping" across the Irish Sea seeking bargains in Scotland. Six out of seven bidders for a period office building in Edinburgh's George Street were Irish investors, according to agents and property sources in the city.
The interest in the building by Irish investors is, they say, illustrative of what is being seen in the Scottish commercial property market as a wave of Irish acquisition. The Scotsman newspaper has run articles recently in its property section referring to the local market's "Emerald Smile" and another headed "Irish eyes on Edinburgh".
Iain McLean, partner in Steedman Ramage WS, a Scottish law firm which specialises in commercial property law, commented: "Investment surveyors are probably in a frenzy about Irish activity here. You could say that if they are not selling or buying for Irish, they are probably not doing much in the way of investment. "We don't think that yields are particularly good at the moment, just better than they are in the South (of Ireland). In fact, yields are coming down, particularly due to the impact of Irish buyers. There is a great deal of competition."
Asked about the recent surge in Irish investment activity in Scotland, Mr McLean said that apart from the temptation of better yields, he feels there is an affinity between Irish and Scots "and I feel the Irish, both North and South, feel comfortable about investing in Scotland".
Mr McLean estimated Steedman Ramage has acted on behalf of vendors or purchasers in deals involving Irish investors worth of £30 million sterling so far this year. In most cases, finance has been arranged through Irish banks.
Denise Murphy, associate director in investments with Hamilton Osborne King in Dublin, has completed £55 million worth of deals from Irish investors in Scotland. HOK, in association with CB Hillier Parker, acted for the Irish vendor of RWF House, in Gordon Street, Glasgow. The former RW Forsyth department store was acquired in February for £7.25 million sterling on behalf of a private Irish client. The net initial yield is 7.2 per cent and this should rise to 8 per cent on completion of rent reviews this summer.
The tenant list includes British Airways, TSB bank and Going Places leisure travel on the ground floor, with a large legal firm on the upper floors. The building occupies a prominent site on the corner of Gordon Street and Renfield Street in the heart of Glasgow's city centre.
"I would say people have just been catching on to Scotland in the past six to nine months. The office market, particularly in Edinburgh, is very strong and is probably most comparable to Dublin with low vacancy rates and occupier demand quite good," said Ms Murphy.
"Glasgow vacancy rates are higher but three of the very large office buildings are now almost fully let and rental growth is expected in the next 12 months." One of the biggest deals by an Irish investor has been the £16 million paid for Trinity Park House, a major office campus let to the Secretary of State for Scotland. The 154,000 sq ft complex houses the departments of health and inland revenue on a 30-year lease from 1974, producing a rental of £1,454,800 representing a net initial yield of 8.7 per cent.
The Trinity Park House deal was completed by Paddy Brennan, investment director with Lambert Smith Hampton, in Belfast. "My concern would be that so many people are bidding that they are beginning to bid against themselves, said Mr Brennan.
Although rental levels in Edinburgh are strong, reaching £24 per sq ft, agents have begun, increasingly, to point Irish investors out of Glasgow and Edinburgh to places such as Aberdeen and Inverness.
Other deals for Irish investors completed by LSH include 10-14 Melville Street, Edinburgh, a mid-terraced Georgian townhouse office producing a rental of £193,340 from the British Linen Bank, a subsidiary of the Bank of Scotland. It was bought by an Irish investor earlier this year for £2.45 million, representing a yield of 7.5 per cent. Three retail units in the High Street, Kirkcaldy, were also bought on behalf of an Irish investor by LSH for £1.075 million, representing a yield of 9.34 per cent.
Among other Irish deals in Scotland are: 12 Charlotte Street, Edinburgh, a period office let to a legal firm, bought for £1.3 million producing a yield of 7.2 per cent for a Dublin-based investor; 223225 West George Street, Glasgow, bought by another Southern Irish investor for £1.75 million (7.2 per cent); another office in Melville Street, Edinburgh, bought for £677,000 (7.29 per cent); Buchan House, a 26,000 sq ft modern office building with a traditional stone facade on St Andrew Square, Edinburgh, bought in February by an Irish investor for £6 million (7.26 per cent); the Queens' Drive Retail Park, in Kilmarnock, bought by an Irish investor earlier this year for £11.4 million (7.25 per cent); a High Street shop in Kirkcaldy, producing £105,000 per annum, bought for £1.075 million (9.25 per cent).
