The value of investments and any income from them can fall and you may get back less than you invested.

Commercial property: down but not out

Since the Brexit vote, some dire predictions have been made about the London commercial property market. However, in the latest Brewin Dolphin podcast, McLennan tells Ben Gutteridge, Brewin Dolphin’s head of fund research, that there is “huge appetite among overseas investors for London assets.”

Countering some of the negativity that has infected the property market in the past few weeks she  says that it is “still possible to attract the right rent on the right buildings”, which is vital if a property fund is going to meet the income needs of investors.

Property funds have been in the spotlight after a number suspended trading to prevent forced sales of assets as people tried to get their money out.

Henderson’s UK property fund is among those that have closed their doors to investors wanting to exit and in the podcast Simon Hillenbrand, Henderson’s Head of UK Retail Distribution, explains the thinking behind the decision. He adds: “The ultimate intention is to reopen the fund at a time when we have raised enough cash to meet the level of redemptions.”

Looking forward McLennan says it is still too early to know how Brexit will affect commercial property over the longer term, but she admits there is a lot  of uncertainty. Two or three deals at £40m-£50m plus will give valuers a better indication of  whether “we are seeing a new market trend in terms of yields and the profile of the purchaser.”

However, she believes her fund is well positioned. Asked by Gutteridge if power has shifted to tenants who might demand lower rents she says: “I think we are some way off that. Our tenant quality is strong enough that we are not going to struggle with that in the short term but I’m not saying we won’t be immune to it.”

She points to the fund’s low void rate of about 2.8%, against the IPD average of about 9% - 10%, and argues that the fund is invested in areas that look “protected” in these uncertain conditions. That includes “alternative” properties such as data centres, student accommodation, hotels and leisure, care homes and private healthcare.

To listen to this or other Brewin Dolphin podcasts, visit Sharing our thinking - Podcasts.

 

 

 

The value of investments can fall and you may get back less than you invested.

Past performance is not a guide to future performance.

All information within this publication is for illustrative purposes only and is not intended as investment advice. No investment is suitable }in all cases and you have any doubts as to an investment’s suitability then you should contact your financial adviser.

The opinions expressed in this podcast are not necessarily the views held throughout Brewin Dolphin Ltd.

We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such security mentioned in this podcast. For further information, please refer to our conflicts policy.

 

Share

Valued by our clients

With 30 offices across the UK, Channel Islands and Ireland we combine the best of local understanding with national scale and perspective.