The underlying fundamentals of the UK commercial property market remain compelling despite the impact Brexit uncertainty is having on the economy, the chairman of an Aberdeen Standard Investments managed trust said today.
Andrew Wilson’s comments came as the UK Commercial Property REIT realised annual results showing it had underperformed its benchmark last year with a total return on its portfolio of 5.9% versus 6.7% for its comparable index.
The trust, which has £1.45 billion of investments including the M8 industrial estate near Glasgow, said that although its portfolio delivered outperformance for the first nine months of the year, it fell behind in the final quarter due to factors including one-off costs and the timing of transactions.
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Over a three year period the trust’s portfolio has outperformed its benchmark with returns of 24%.
Wilson said although the Brexit debate had caused a period of political uncertainty “which has not been seen for a generation” and that the economy had suffered, he believed that the UK commercial property market in particular, “has a lot to offer”.
“While poorly located retail will continue to struggle, the underlying fundamentals of the UK commercial property market remain compelling, particularly in the industrial sector. Compared to previous cycles, commercial real estate is far more prudently geared, has high occupancy levels and limited supply risk due to low levels of development,” he said.
“A further attraction is the ongoing and significant differential between property yields and gilts in an environment where interest rates are forecast to remain lower for longer.”
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In December, the company completed its largest acquisition to date with the purchase of a portfolio of distribution units in the Midlands for £85.4 million.
Earlier this month shareholders approved the expansion of the company’s investment policy giving it the flexibility to invest further into alternative property assets such as healthcare, student housing, hotels, car parks and pub.
Following a recent debt refinancing the company has £95 million of financial resources available for investment opportunities.
