Property asset manager F&C is predicting another strong performance for the UK commercial property industry in 2005, with total returns of 9% a year predicted across the next five years.
Michael Barrie, director of property funds at F&C, said: “The 2004 out-turn was the highest we have seen for ten years and reflected continued strong investor demand.
“Whilst we don’t believe the heady returns of 2004 will be repeated in coming years we do believe they will continue to be attractive, with between 7% and 9% this year and 9% per annum over the next five years.”
Barrie’s comments came following the publication this morning of year-end results for ISIS Property Trust and half-year results for ISIS Property Trust 2, both of which are managed by F&C.
ISIS Property Trust posted an increase in net asset value of 23% per share from launch in October 2003 until 31 December 2004, while ISIS Property Trust 2, launched on 1 June 2004, recorded a 15.2% increase in net asset value per share.
F&C said that even though retail property had been the best performing sector over the last three years, the trend was likely to continue through 2005 although not at the “stellar” levels of 2004.
It also predicted that performance disparities between retail, offices and industrial properties would continue to narrow.
“Even the London office market – the relative laggard – has improved sharply,” said Barrie, “and are now expected to see a return to rental growth, albeit at modest rates.”
He added: “The key to out-performance over the coming year will be less about sector specialisation and more about property selection and the quality of individual covenants.
Finding high quality tenants, with long leases is absolutely key to delivering the yields which investors find so attractive about this asset class.”
References: EGi News 17/02/05
