The UK commercial property market continues to perform well even if the huge momentum seen last year has slowed somewhat, according to the latest results of MSCI Inc.’s AREF/IPD UK Quarterly Property Fund Index.
The index shows that unlisted real estate funds were able to post a return of 2.5 per cent in the three months to March of this year, which was slightly less than the 3.8 per cent noted in the fourth quarter of 2014.
Funds in the AREF/IPD UK Quarterly Property Fund Index grew by 15.9 per cent year on year and thus continue to outperform the equities and bonds markets, which grew by 4.0 per cent and 1.8 per cent respectively during the three month period in question. This is below the IPD UK Monthly Property Index, which achieved a total return of 18.3 per cent in the 12 months to March 2014.
Executive director at MSCI, Phil Tily, says; “The latest results of the AREF/IPD UK Quarterly Property Index illustrates the ongoing growth within the property market, despite a slowing in performance levels from the final three months of 2014.
“A 15.9% return year-on-year continues to outperform equities and bonds markets.”
The message, then, is that investment in commercial property continues to be a desirable path for commercial property funds, given the stable nature of returns in the field and the potential for further asset growth down the line.
Although market fluctuations are to be expected, the ongoing strength of the UK’s commercial property values are hugely encouraging – allowing balanced funds to post a 2.8 per cent return in the first quarter and thereby outperform the market overall.
AREF chief executive John Cartwright concurs, saying; ““Whilst the commercial market has cooled slightly in the first quarter, it is interesting to see that the distribution yields on other balanced funds are coming in at 4% – higher than interest rates.
“Getting a better income return on property investments than cash, and with the prospect of long term income growth, still supports the case for property as an asset class.”
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