In each meeting there was a lively debate regarding the UK economy, the markets and the outlook for commercial property. Having seen a capital fall of 36% since the peak in June 2007, as measured by IPD, the general conclusion was that once again property was beginning to offer an attractive opportunity. The market is increasingly being underpinned by income having seen yields move from 5% to 7% for the market as a whole and investors are looking to property for an attractive income stream having seen interest rates fall to historically and significantly low levels.
Whilst the UK economy was likely to remain a challenging environment in which to operate, the Charities Property Fund was well positioned with our bias to income (current yield of around 8%), better than average tenant quality, supported by an extremely low void rate and limited exposure to the High Street and City of London offices. The Fund has benefited from being precluded from gearing or borrowing or from speculative development.
Cordea Savills are keen to take advantage of those who are forced to sell distressed assets which may offer a one-off opportunity. It may be a suitable time for trustees to revisit the case for UK property and to take advantage of the historically low pricing that is now available. They believe the best returns over the medium term are likely to be earned from investing new money whilst distress remains in the market place, so that bargaining power can be used to full effect.