by Alex Catalano
Some evidence that financial institutions are regaining their appetite for property emerges from the institutional investment figures for the second quarter of 1987, published by the Department of Trade and Industry.
From a low of £13m the previous quarter, net purchases have risen to £163m. The main buyers have been the insurance companies, whose net investment of £283m helped compensate for a £120m disinvestment by pension funds.
“At first glance, the pension fund figures look as if there has been a major move out of property,” say agents Fletcher King. “However, closer examination shows the level of purchases by pension funds and insurance companies are continuing on an upward trend.
“Both pension funds and insurance companies are using the improved market to rationalise their portfolios by significant bouts of selling to property companies, whose voracious appetites have been funded by freely available bank finance and a buoyant equity market.” Total purchases by institutions during the second quarter just nudged over the £1bn mark.
A new report, Investment in City Offices, by Chesterton Lalonde with the Investment Property Databank shows that the return on City offices is outperforming the rest of the country. Over the period 1980-86 their total return averaged 11.7% pa, largely owing to good capital growth and high rental growth over the last few years.
However, the survey also shows institutions turning over their portfolios of City offices, opting to hold fewer, higher-value schemes.
