F&C Commercial Property Trust has blamed higher-than-average office vacancy levels at its assets in the South East, as well as a lower-than-benchmark weighting to South East industrial assets, for the underperformance of its portfolios in 2017.
Its industrial portfolio performed 1.7% below the benchmark total return of 19.4%, while its office portfolio reported a total return of 5.9%, 2.3% lower than the benchmark total return of 8.2%.
The company said its business parks dragged down the office portfolio. It plans to exit at least one of the buildings at Watchmoor Park, in Camberley, Surrey, via a sale to a residential developer after receiving planning approval to convert an office building into residential. It is also exploring options for Thames Valley Park in Reading, Berkshire.
In Scotland, the firm reported that it was in advanced negotiations at Edinburgh Park to lease the entire building to a major multinational corporate, which is expected to complete in the first half of 2018.
The company’s rental income stayed broadly flat at £64.8m for 2017, compared to £64.6m in 2016.
Net assets increased in value to £1.13bn, up from £1.08bn in 2016, while pre-tax profit jumped 86% to £93m in 2017, up from £50m in 2016.
F&C said it expects a “muted” 2018 as Brexit negotiations and a deteriorating retail environment stymie rental growth.
However, it says it will continue to look for new acquisitions, particularly for town centre offices and in industrial and logistics, adding that high investor demand meant slightly over-heated pricing for many assets in both the industrial and logistics markets.
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