Group publishes research into rising popularity of commercial property market
The David Aaron Partnership has published a research guide on the commercial property market, including a look at the resurgence in the popularity of property collective investment vehicles.
David Aaron, chairman and chief executive, said: 'While most investment managers are still cautious about world stock markets, confidence about the performance of the commercial property market over the next few years is strong.
'Most analysts expect the high yields, averaging 7% a year on commercial property, to remain and that rents in most sectors will rise at least with the rate of inflation, giving gross returns of between 9% and 11% per year.'
According to the guide, more than £14bn has been earmarked by US institutional investors to be invested in UK and European commercial property this year, with George Soros reported to be investing $200m of his own money in property.
Aaron said that the yields from commercial property remain high compared to the yields on other asset classes and when rental growth prospects are included, potential returns are highly favourable. He said that most indicators suggest the positive outlook for commercial property will continue for the next few years. He added: 'Rents are rising in most sectors and demand, especially for office and industrial property, is increasing. Income yields are now much higher than on gilts and equities and there is more potential for capital growth if yields fall.'
With this in mind, individual investors should seriously think about investing a proportion of their portfolio into this market as investment in property is much less volatile than in stocks and shares, he added.
The 30-page guide issued by the intermediary group has been specifically designed for the individual investor and recommends the top three property bonds and top two unit trusts The funds were selected on the basis that the portfolios must be mainly invested directly into commercial property, they must be more than £50m in size, have good management and good performance over three, five and 10 years. Under these premises, the investments recommended included the Allied Dunbar Property Bond, the Scottish Widows Property Bond, the Norwich Union Property Unit Trust and Bond and the Portfolio Unit Trust.
Aaron said: 'Unless investors are extremely wealthy, their only real option, in order to get a good spread of property, is to invest through bonds or unit trusts. Our selection system cuts out the smaller funds, which are unable to offer the width of spread we recommend, and those which have been mainly invested in property shares.
'We see the better performing property bonds and unit trusts as being undervalued investment opportunities for conservative and realistic investors.'
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress