As bond values fall, investors are turning towards the commercial property market, according to leading industrial experts.
The market has had a turbulent history recently with prices falling dramatically since the global crisis hit in 2007. Capital values further fell by a mammoth 32.5 per cent from 2007’s peak, whilst prices have seen a similar 3.2 per cent decline since September 2011.
However, experts have suggested that the market is set to turn around for investors in 2013, signposting to average yields of up to 6.5 per cent, which are very high. Philip Nell, manager of the Aviva Investors Property Trust, said: “We have virtually doubled our market return forecast for UK commercial property for 2013.” Mr Nell went on to argue that major value can now be found in secondary properties outside of the capital city. These sites tend to not only have a long lease but they have proven to offer higher returns in recent years.
However, there is the opposing view that prime real estate should be focused on. According to the Financial Times, Iain Tait, of discretionary wealth manager London & Capital, said: “We like quality core real estate for its income quality and potential for keeping in check with inflation much further down the line where real assets will perform. But despite low yields we would very much stick to core and quality – both location and asset.”
Advisers continued to suggest that the market should be approached, either through a fund that will directly invest into property, or through share funds that will invest in property companies.
As the economy continues to fluctuate, investors are beginning to see the commercial property market as a safe haven which is more secure than industrial or retails sectors. Only time will tell what shape the future of commercial property will have.