With Brexit hanging in the balance, a general election now weeks away, persistently low interest rates and high street store closures soaring, many investors’ eyes are on property.
But what are investment companies’ views on the sector and what does the future hold for this asset class?
Peter Lowe, manager of BMO Real Estate Investments, said: “The impasse at Westminster and the prospect of a change of government is destabilising for the market. The UK is a vibrant, capable economy with a skilled workforce and many comparative strengths, but the continued delays have paralysed business and are adversely impacting the economy.
“The most immediate impact of the continued uncertainty on the real estate market is the collapse in transaction volumes which have fallen sharply and are now below long-term averages. While there will be continued near-term disruption and the potential for ongoing volatility in markets, the sector is in relatively good health and offers much for the medium-term investor. There is plenty to like about UK real estate, not least the yield premium, income growth in most sectors outside of retail, good levels of occupancy for quality stock and a relative absence of typical ‘late cycle’ behaviour in the lending and development space.”
Stephen Inglis, CEO of London & Scottish Property Investment Management Limited, the asset manager of Regional REIT, said: “Brexit uncertainty is providing buying opportunities for experienced asset managers who are able to methodically identify the most suitable assets where their unique skills can best be deployed. The future is still uncertain but we have seen office letting continue to perform well in the regions. We anticipate that any negative impact will disproportionately impact the prime markets and London specifically, neither of which we invest in.”
“The impasse at Westminster and the prospect of a change of government is destabilising for the market. The UK is a vibrant, capable economy with a skilled workforce and many comparative strengths, but the continued delays have paralysed business and are adversely impacting the economy.”
Will Fulton, manager of UK Commercial Property REIT, said: “Our investment process is underpinned by a wide, research-based view of the market and our deep-seated stock-picking expertise, enabling us to identify the right buildings in good locations and in sectors experiencing tailwinds.
“For example, the long-term structural changes are being driven by ecommerce, physical improvements to infrastructure or the wider built environment (transportation and public realm) which we believe will enhance future value and grow rental income. All of this is enabled by our strong balance sheet.
“UK Commercial Property REIT has one of the lowest gearing ratios in its peer group in the range of approximately 16% (to 22% fully invested) and with £85 million available to deploy in new opportunities. The portfolio is heavily weighted towards the best-performing market segments and is diversified by occupier, geography and sector.”
Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC), concludes: “The closed-ended structure of investment companies makes them particularly well suited to investing in hard-to-sell assets such as property. This was highlighted by the differing fortunes of open-ended and closed-ended property funds following the EU referendum in 2016.
Despite discounts widening, closed-ended property companies continued to trade, with their managers able to take a long-term view of the market, whilst their open-ended counterparts were forced to suspend due to high outflows.
“The fact that investment company managers don’t need to worry about meeting redemptions means that property-focused companies can hold less cash than open-ended property funds, resulting in more money being invested and put to work for the end investor. During low-interest rate periods, investment companies provide a structurally sound vehicle through which investors can access this illiquid asset class, providing attractive levels of income and the prospect of long-term capital growth.”