UK - A new report insists that the UK commercial property market is in the midst of a resurgence despite conflicting research which shows that investment could be heading for a downturn.
According to the report ‘Why invest in Property?’ by consultants ATIS Real Weatheralls, investors can find still find a “stable” haven in property following five years of consistently better returns than equities or gilts.
Charles Clark, director of UK investment for the firm said: “Property has a unique set of advantages and disadvantages in relation to other asset classes and with the current low inflation and low interest rates it is particularly appealing to investors.
“Property is again being viewed as a hybrid investment vehicle that combines equity and debt characteristics, since it is both income-producing and its value increases when the economy is expanding.”
But, research by property specialists DTZ shows that institutional investment in commercial property has dipped for the first time since 1998.
Since the beginning of 1998 insurance companies and pension funds have increased their investment in commercial property by around £1.2bn every quarter. But in Q3 2001 that rise was dented to the tune of £75m and is evidence of caution in the market, said the firm.
Mike Cutteridge, DTZ head of investment, said: This fall in investment demonstrates some caution by investors which, in the light of the current economic climate, isn't at all surprising.
“Investment through 2001 to date remains well above the long term average and I expect this to continue. Funds are attracted by the income stream from commercial property which is likely to remain stable and high for the foreseeable future, something which is generally backed up by the recommendations of actuaries and investment consultants.
The research highlights that since the beginning of last year, the fall in equity prices has pushed property's weighting in the investment portfolios of some funds towards the top end of ranges. This is reflected in lower than average levels of purchasing in Q3 and higher than average sales as pension funds and insurance companies have held back on spending their investment allocations pending positions in other markets, added DTZ.
By Madhu Kalia
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