By SIMON MOORE 16/06/2010
Commercial property has been a hot topic for investment since mid 2009. At Bestinvest, we turned positive on the sector in June 2009 because the yields looked attractive relative to other asset classes and the price of commercial property funds were close to their lows.
What is the outlook one year on?
According to the Investment Property Databank (IPD), the total return on UK commercial property has been 22.5% over the last 12 months, of which the capital values has risen 13.5%. We are starting to see a slowdown in the rate of capital growth, having risen 1.6% in March, 0.8% in April and prices only rose 0.5% in May 2010.
Our view
Capital growth is now levelling out and we expect it to reach a steady level by the end of 2010. However, there remains some attraction to the asset class through the income generation from good quality portfolios.
Long term investors looking for income should continue to maintain exposure to the asset class. Because capital values will plateau later this year, we are looking at managers who can add value and help provide some capital appreciation through good asset management.
Our recommendations
Investors can access commercial property through Real Estate Investment Trusts (REITs), listed investment companies or managed funds. Our recommendations for each are listed below;
If there is anything you wish to discuss please call one of our Investment Professionals on 020 7189 9999.