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Commercial Property News
UK Commercial Property Investment Funds see positive flow for first time since April 2008
UK Commercial property investment experts have welcomed news that UK property funds saw their first net investment inflows into the sector since April last year.
The figures from the Investment Management Association showed £2 million. of inflows during May. This compared with outflows of £12 million. in April.
James Crookes, Property Investment Partner at international law firm Pinsent Masons said: “The net inflows into UK property funds is encouraging for us all, and reflects the increasing activity that we are seeing in the UK investment property market from smaller investors in particular".
Property funds reported continuing confidence from retail investors with net inflows of £36 million., up from £19 million. the previous month. However, institutional investors continued to take money out of property funds.
Crookes explained: “The disparity between what institutions and retail investors are doing might be explained by a number of factors. The typical retail investor has greatly reduced his UK property holdings - direct or indirect - over the last two years and yet, typically, his IFA might be advising him that UK property should constitute 10-20% of an investment portfolio.
“Recent reports that the market might have bottomed out, coupled with various stories in recent months suggesting the "death of the cult of the equity" and a growing belief in the retail community that equities are unlikely to deliver the huge outperformance that they have delivered in recent decades, is driving many retail investors back into the arms of the UK property funds where they see real value. A slow but potentially large recovery in a fund's performance is acceptable to the retail investor who might be looking at a 10-20 year hold.”
While these factors will also affect institutions, many of them are driven by the added factor of benchmarking within the sector, and being seen to invest in a similar way to their competitors. Crookes added: “For many institutions, short term performance is key to their being able to attract investment, and so for as long as there remains uncertainty in the UK property market, we are unlikely to see their return to property funds."
Michael Riordan, Head of Investment at Gerald Eve, said: "Retail investors are seeing poor returns holding money on deposit and are picking up on the fact that commercial property values have been in decline now for two years, and some well know property figures are returning to the market underlining the view that we are at or close to the bottom of the cycle.
“Whilst institutional investors on the whole are not following this trend there are signs that one or two of the more entrepreneurial institutions are beginning to invest."
The figures from the Investment Management Association showed £2 million. of inflows during May. This compared with outflows of £12 million. in April.
James Crookes, Property Investment Partner at international law firm Pinsent Masons said: “The net inflows into UK property funds is encouraging for us all, and reflects the increasing activity that we are seeing in the UK investment property market from smaller investors in particular".
Property funds reported continuing confidence from retail investors with net inflows of £36 million., up from £19 million. the previous month. However, institutional investors continued to take money out of property funds.
Crookes explained: “The disparity between what institutions and retail investors are doing might be explained by a number of factors. The typical retail investor has greatly reduced his UK property holdings - direct or indirect - over the last two years and yet, typically, his IFA might be advising him that UK property should constitute 10-20% of an investment portfolio.
“Recent reports that the market might have bottomed out, coupled with various stories in recent months suggesting the "death of the cult of the equity" and a growing belief in the retail community that equities are unlikely to deliver the huge outperformance that they have delivered in recent decades, is driving many retail investors back into the arms of the UK property funds where they see real value. A slow but potentially large recovery in a fund's performance is acceptable to the retail investor who might be looking at a 10-20 year hold.”
While these factors will also affect institutions, many of them are driven by the added factor of benchmarking within the sector, and being seen to invest in a similar way to their competitors. Crookes added: “For many institutions, short term performance is key to their being able to attract investment, and so for as long as there remains uncertainty in the UK property market, we are unlikely to see their return to property funds."
Michael Riordan, Head of Investment at Gerald Eve, said: "Retail investors are seeing poor returns holding money on deposit and are picking up on the fact that commercial property values have been in decline now for two years, and some well know property figures are returning to the market underlining the view that we are at or close to the bottom of the cycle.
“Whilst institutional investors on the whole are not following this trend there are signs that one or two of the more entrepreneurial institutions are beginning to invest."
Thu, 2nd Jul 2009