'Once-in-a-generation' opportunity to buy UK commercial property
Published on
01/12/2011 10:48:17
A leading property expert insists now is a once-in-a-generation
opportunity for businesses to acquire commercial property in the
UK.
Don Jordison, manager of the Threadneedle UK Property Trust,
revealed earlier this month that he had completed more deals in
November than in the past six months put together.
Mr Jordison believes prices are more distressed now than at the
height of the economic recession in 2008, which has contributed to
greatly increased property sales.
He said: "You have a moment in time that is five years from the
top of the market. [It is] a point at which many five-year loan
deals were structured, and we are seeing those unwind with the need
for refinancing or crystallising their losses; this means there are
many sellers coming back to the market."
Jordison admits he and many others are acquiring UK commercial
property on the belief that the market is simply mispricing
distressed assets and not looking long term.
"We are buying respectable buildings in good southern locations,
some at half the cost they were to build in the first place.
"They are let on three-to-five-year leases on yields of 15-20
per cent, which means you are getting most of the principal back
over the term of the lease. They are simply mispricing it."
The net income return delivered by property is therefore proving
attractive to investors for both investment performance and
diversification benefits.
There remains a strong historic relationship between rental
income growth and GDP growth for landlords. Returns will reflect
local market conditions including available supply and the
attraction of individual buildings themselves, demonstrated by
outperformance of commercial property in Central
London markets in comparison to the rest of the country.