Short-term pricing worries
A UK commercial property investment fund has sounded a note of caution about pricing in the short term. Investment Week says that Ignis issued a briefing note to investors in its £510m UK Property Fund last week, advising that there is potential for a short-term disconnect between capital value growth and rental value growth.
It said that prime yields ran the risk of over-correcting in the short term, leading to a “moderate retrenchment” in capital values. Ignis says the situation has been made worse by the current lack of high-quality commercial properties available to buy in the market. At the moment 20% of the fund is held in cash.
However, in the medium term the company remains “very positive” towards the commercial property market and expects returns of 8% to 9% per annum over this range. It also expects returns to remain positive in the short term.
