Strong performance predicted for commercial property funds
(12/3/2005)
Strong performance predicted for commercial property funds (12/3/2005)
Following the strong performance of UK commercial property funds in 2004, experts are suggesting that 2005 could be an even better year for this market.
Last year, the sector saw an average growth rate of 7%. The latest predictions have suggested that growth in 2005 will increase to 9% for the year with similar returns expected until 2010.
Commercial Property Funds are designed to generate capital growth through the acquisition and management of a high quality portfolio of UK leased commercial property assets. The majority of properties will have long leases (over 10 years unexpired) and will be let to financially strong, blue chip tenants on modern lease terms.
Most property funds current strategy is to concentrate away from London and look for modern high specification buildings in the office, retail, retail warehouse and warehouse sectors. This helps with the funds aims to produce steady, low volatile performance as:
• Properties with long lease terms let to undoubted or substantial covenants provide a rental flow
is relatively risk free and certain with yields of approximately 6.5/7.25%
• Capital value increase is driven by anticipated rental growth and national & regional factors
associated with property supply, demand and economic activity
• Commercial property has historically and constantly returned steady performance of between 10
-12% as measured by the IPD (Investment Property Database) Index
Each property fund has a team of property specialists and legal teams that undergo due diligence on properties the fund is looking to acquire. Simon Hills of the Premier Diversified Property Fund tells Candour that “Premier have a total of £28m where offers have been accepted by vendors following long-term due diligence and negotiation. These include a substantial office let to a high profile plc in the north and a portfolio of retail units in Hampstead - a very attractive area of London.
Simon Hills continues that “bids are also being submitted for a further 4 properties, so assuming all goes according to plan this will see the portfolio reach and exceed £100m over the next few months”.
Candour advises on a wide range of commercial property funds from the worlds leading financial institutions and investment managers.
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